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Spatial Policies and Land Use Patterns: Optimal and Market Allocations

Author

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  • Kyriakopoulou, Efthymia
  • Xepapadeas, Anastasios

Abstract

We study the optimal and equilibrium distribution of industrial and residential land in a given region. The trade-off between the agglomeration and dispersion forces, in the form of pollution from stationary forces, environmental policy, production externalities, and commuting costs, determines the emergence of industrial and residential clusters across space. In this context, we define two kinds of spatial policies that can be used in order to close the gap between optimal and market allocations. More specifically, we show that the joint implementation of a site-specific environmental tax and a site-specific labor subsidy can reproduce the optimum as an equilibrium outcome. We also propose a novel approach that allows for endogenous determination of land use patterns and provides more precise results compared to previous studies.

Suggested Citation

  • Kyriakopoulou, Efthymia & Xepapadeas, Anastasios, 2014. "Spatial Policies and Land Use Patterns: Optimal and Market Allocations," Climate Change and Sustainable Development 163617, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcl:163617
    DOI: 10.22004/ag.econ.163617
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    Keywords

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    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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