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Spatial Policies and Land Use Patterns: Optimal and Market Allocations

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  • Efthymia Kyriakopoulou
  • Anastasios Xepapadeas

Abstract

Environmental conditions and pollution levels have been proven to affect firms' and households' location decisions in various ways. In this paper, we study the optimal and equilibrium distribution of industrial and residential land in a given region. Industries produce a single good using land and labor and generate emissions of a pollutant, and households consume goods and residential land and dislike pollution. The trade-off between the agglomeration and dispersion forces, in the form of industrial pollution, environmental policy, production externalities, and commuting costs, determines the emergence of industrial and residential clusters across space. We also 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.

Suggested Citation

  • Efthymia Kyriakopoulou & Anastasios Xepapadeas, 2013. "Spatial Policies and Land Use Patterns: Optimal and Market Allocations," DEOS Working Papers 1328, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1328
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    References listed on IDEAS

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    More about this item

    Keywords

    Agglomeration; land use; spatial policies; pollution; environmental tax; labor subsidy;
    All these keywords.

    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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