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Agglomeration externalities and urban growth controls

Author

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  • Wouter Vermeulen

Abstract

How can land use policy enhance the exploitation of external urban agglomeration economies? In a system of heterogeneous cities, we show that the second-best land use policy constrains city creation, while subsidizing (taxing) urban development in cities in which the marginal-average productivity gap is above (below) average. This policy cannot be decentralized to competitive urban developers, yet competition among urban developers does result in a lower-best outcome in which development is subsidized everywhere if city creation is unconstrained. A numerical application indicates that a substantial share of the welfare gains from implementing a second-best land use policy may then still be attained, although the aggregate amount of land in urban use is considerably larger.

Suggested Citation

  • Wouter Vermeulen, 2017. "Agglomeration externalities and urban growth controls," Journal of Economic Geography, Oxford University Press, vol. 17(1), pages 59-94.
    • Handle: RePEc:oup:jecgeo:v:17:y:2017:i:1:p:59-94.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbv047
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    Cited by:

    1. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 171-245, Elsevier.
    2. Clive Egbert Coetzee & Ewert P. J. Kleynhans & Ewert P. J. Kleynhans, 2022. "The Effect of Spatial Unemployment on the Neighbouring Regions’ Economies: A Regional Case Study of KwaZulu-Natal in South Africa," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 20(4 (Winter), pages 401-431.
    3. Albouy, David & Behrens, Kristian & Robert-Nicoud, Frédéric & Seegert, Nathan, 2019. "The optimal distribution of population across cities," Journal of Urban Economics, Elsevier, vol. 110(C), pages 102-113.
    4. Jan Rouwendal & Wouter Vermeulen, 2012. "A Note on the Value of Foregone Open Space in Sprawling Cities," SERC Discussion Papers 0101, Centre for Economic Performance, LSE.

    More about this item

    Keywords

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    JEL classification:

    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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