Urban Expansion or Clustered Deconcentration? An Applied Welfare Economic Analysis of Growth Controls and the Foundation of Satellites

Tinbergen Institute Discussion Paper No. 08-043/3

40 Pages Posted: 21 Apr 2008

See all articles by Wouter Vermeulen

Wouter Vermeulen

CPB Netherlands Bureau of Economic Policy Research; VU University Amsterdam - Department of Spatial Economics

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Date Written: April 2008

Abstract

How should urban containment and the diversion of households to nearby residential areas be evaluated from a welfare economic perspective? Assuming the existence of a negative externality of city size, we develop a concise general equilibrium model for a mother city and a satellite. This satellite should be founded if the gain in surplus exceeds the fixed costs of intercity infrastructure provision, and a Pigouvian tax on the conversion of land to urban use in both cities would then attain the first-best allocation. Rising incomes and falling transport costs enhance the surplus gain from "clustered deconcentration", or the accommodation of growth in planned satellites, relative to expansion of the mother city. Nevertheless, plans by the Dutch government to uphold strict growth controls around Amsterdam, while fostering large-scale residential construction projects in the nearby satellite of Almere, are difficult to reconcile with the optimal policy in a calibrated version of our model.

Keywords: land use regulation, growth controls, systems of cities, housing markets, applied general equilibrium

JEL Classification: R52, R13, R14

Suggested Citation

Vermeulen, Wouter and Rouwendal, Jan, Urban Expansion or Clustered Deconcentration? An Applied Welfare Economic Analysis of Growth Controls and the Foundation of Satellites (April 2008). Tinbergen Institute Discussion Paper No. 08-043/3, Available at SSRN: https://ssrn.com/abstract=1123430 or http://dx.doi.org/10.2139/ssrn.1123430

Wouter Vermeulen (Contact Author)

CPB Netherlands Bureau of Economic Policy Research ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

VU University Amsterdam - Department of Spatial Economics

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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