Modelling local growth control decisions in a multi-city case: Do spatial interactions and lobbying efforts matter?

Our article analyses the determinants of the decision of French municipalities to raise the “taxe locale d’équipement”, a local development tax which can be regarded as a price measure to control growth. We model the decision to raise this tax as the result of a political struggle between different land-related interest groups. As a city’s decision to control its development raises demand for housing in neighbouring cities, local growth control choices have to be considered as spatially interdependent. Our spatial econometric specification is directly derived from the theoretical model and thereby becomes a natural tool to estimate such strategic interactions between local governments. The empirical results confirm our predictions. The decision to raise the “taxe locale d’équipement” is influenced by the lobbying of land-related interest groups and subject to spatial strategic interaction. But against the general presumption that growth control choices are mainly determined by resident homeowners, our analysis reveals that the main driving force seems to be “absentee” homeowners which act as landlords. We find weak evidence for the presence of “urban growth machines” in France.