Price Based Policies for Managing Residential Land Development: Impacts on Water Quality

Abstract

Land plays a critical part in determining the health of an urban ecosystem. One of its key roles is regulation of nutrient delivery. In this paper, we combine results from an IV duration model with a water quality model in a series of land use simulations to examine the impact that different land use policies have in limiting or enhancing nutrient pollution in an urban setting. Our results reveal significant trade-offs between objectives for managing urban growth and those for managing water quality. A uniform tax on development significantly reduces acreage developed, but increases nitrogen and phosphorus loads. A green tax for development on forested parcels is the most effective at mitigating water quality impacts, albeit with the lowest reduction of acreage developed. Our results suggest that policymakers and planners should use a multi-objective approach in designing land use policies.

Keywords: Land Use, Water Quality, Duration Models, Price Endogeneity

JEL Classification: Q24, Q25, Q53, Q58