Efficient growth boundaries in the presence of population externalities and stochastic rents
Journal
The Quarterly Review of Economics and Finance
Journal Volume
52
Journal Issue
4
Pages
349--357
Date Issued
2012-11
Author(s)
Abstract
This paper investigates how the uncertain demand for urban land affects the design of efficient growth boundaries. Landowners decide both the timing of conversion and the capital intensity when facing a population externality that decreases urban rents. While growth controls induce landowners to convert their land earlier than planned, these controls do not affect their intensity choices. Growth controls also raise the prices of both urban and undeveloped land. To accommodate the uncertain demand for urban land, the regulator should slacken the growth boundary control once urban rents pass historically high levels. In general, the regulator should also tighten the control when urban rents become volatile. © 2012 The Board of Trustees of the University of Illinois.
Subjects
Growth boundaries; Population externalities; Real options; Stackelberg game; Transportation taxes
SDGs
Type
journal article