Urban Growth Externalities and Neighborhood Incentives: Another Cause of Urban Sprawl?
This paper suggests a cause of low density in urban development or urban sprawl that has not been given much attention in the literature. There have been a number of arguments put forward for market failures that may account for urban sprawl, including incomplete pricing of infrastructure, environmental externalities, and unpriced congestion. The problem analyzed here is that urban growth creates benefits for an entire urban area, but the costs of growth are borne by individual neighborhoods. An externality problem arises because existing residents perceive the costs associated with the new residents locating in their neighborhoods, but not the full benefits of new entrants which accrue to the city as a whole. The result is that existing residents have an incentive to block new residents to their neighborhoods, resulting in cities that are less dense than is optimal, or too sprawling. The paper models several different types of urban growth, and examines the optimal and local choice outcomes under each type. In the first model, population growth is endogenous and the physical limits of the city are fixed. The second model examines the case in which population growth in the region is given, but the city boundary is allowed to vary. We show that in both cases the city will tend to be larger and less dense than is optimal. In each, we examine the sensitivity of the model to the number of neighborhoods and to the size of infrastructure and transportation costs. Finally, we examine optimal subsidies and see how they compare to current policies such as impact fees on new development.
|Date of creation:||24 Aug 2009|
|Date of revision:|
|Contact details of provider:|| Postal: UMBC Department of Economics 1000 Hilltop Circle Baltimore MD 21250, USA|
Web page: http://www.umbc.edu/economics
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Danny Quah, 2002.
"Spatial Agglomeration Dynamics,"
American Economic Review,
American Economic Association, vol. 92(2), pages 247-252, May.
- Wu, JunJie, 2006. "Environmental amenities, urban sprawl, and community characteristics," Journal of Environmental Economics and Management, Elsevier, vol. 52(2), pages 527-547, September.
- Dennis Epple & Holger Sieg, 1999.
"Estimating Equilibrium Models of Local Jurisdictions,"
Journal of Political Economy,
University of Chicago Press, vol. 107(4), pages 645-681, August.
- Epple, Dennis & Sieg, Holger, 1997. "Estimating Equilibrium Models of Local Jurisdictions," Working Papers 97-05, Duke University, Department of Economics.
- Dennis Epple & Holger Sieg, 1998. "Estimating Equilibrium Models of Local Jurisdictions," NBER Working Papers 6822, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & Joseph Gyourko & Raven E. Saks, 2005.
"Why Have Housing Prices Gone Up?,"
Harvard Institute of Economic Research Working Papers
2061, Harvard - Institute of Economic Research.
- Wolfgang Keller, 2002.
"Geographic Localization of International Technology Diffusion,"
American Economic Review,
American Economic Association, vol. 92(1), pages 120-142, March.
- Keller, Wolfgang, 2001. "Geographic Localization of International Technology Diffusion," CEPR Discussion Papers 2706, C.E.P.R. Discussion Papers.
- Wolfgang Keller, 2000. "Geographic Localization of International Technology Diffusion," NBER Working Papers 7509, National Bureau of Economic Research, Inc.
- William A. Fischel, 1978. "A Property Rights Approach to Municipal Zoning," Land Economics, University of Wisconsin Press, vol. 54(1), pages 64-81.
- Simon, Julian L & Love, Douglas O, 1990. "City Size, Prices, and Efficiency for Individual Goods and Services," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 24(3), pages 163-75.
- Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, March.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
- Wheaton, William C., 1998. "Land Use and Density in Cities with Congestion," Journal of Urban Economics, Elsevier, vol. 43(2), pages 258-272, March.
- Danny Quah, 2002. "Spatial Agglomeration Dynamics," CEP Discussion Papers dp0521, Centre for Economic Performance, LSE.
- Baldwin, Richard & Martin, Philippe, 2003.
"Agglomeration and Regional Growth,"
CEPR Discussion Papers
3960, C.E.P.R. Discussion Papers.
- Brueckner, Jan K & Kim, Hyun-A, 2003. "Urban Sprawl and the Property Tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(1), pages 5-23, January.
- Edward L. Glaeser, 2007. "The Economics Approach to Cities," NBER Working Papers 13696, National Bureau of Economic Research, Inc.
- Thomas J. Nechyba & Randall P. Walsh, 2004. "Urban Sprawl," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 177-200, Fall.
- Ding, Chengri & Knaap, Gerrit J. & Hopkins, Lewis D., 1999. "Managing Urban Growth with Urban Growth Boundaries: A Theoretical Analysis," Journal of Urban Economics, Elsevier, vol. 46(1), pages 53-68, July.
- Brueckner, Jan K., 1997. "Infrastructure financing and urban development:: The economics of impact fees," Journal of Public Economics, Elsevier, vol. 66(3), pages 383-407, December.
- Ihlanfeldt, Keith R. & Shaughnessy, Timothy M., 2004. "An empirical investigation of the effects of impact fees on housing and land markets," Regional Science and Urban Economics, Elsevier, vol. 34(6), pages 639-661, November.
- Gerrit Knaap & Chengri Ding & Lewis D. Hopkins, 2001. "Managing Urban Growth for the Efficient Use of Public Infrastructure: Toward a Theory of Concurrency," International Regional Science Review, SAGE Publishing, vol. 24(3), pages 328-343, July.
- Danny Quah, 2002. "Spatial agglomeration dynamics," LSE Research Online Documents on Economics 2042, London School of Economics and Political Science, LSE Library.
When requesting a correction, please mention this item's handle: RePEc:umb:econwp:09106. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christelle Viauroux)
If references are entirely missing, you can add them using this form.