An Strategic Analysis of Urban Growth Controls

The welfare economics of urban growth controls and other land use regulations have received an increasing deal of attention in recent years, especially at the theoretical level. This paper analyzes two types of growth controls in the context of a closed system of interdependent cities where utility is determined endogenously. Thus, the paper concentrates on how the use of population growth controls and, alternatively, the use of taxes on housing consumption, affect utility levels, taxes revenues and city size. We use a simple context in which households' utility is not affected by environmental amenities. Several scenarios are analyzed, with particular attention to the emerging equilibriums when strategic interaction between cities takes place, both considering static and dynamic horizons. It is shown that cooperation between jurisdictions and the subsequent choice of stringer population controls and higher taxes constitute the equilibrium solution when interaction occurs along infinite periods.