Working Paper
Do supply restrictions raise the value of urban land? The (neglected) role of production externalities
Abstract: Restriction on the supply of new urban land is commonly thought to raise the value of existing urban land. Our paper questions this view. We develop a tractable production-externality-based circular city model in which firms and workers choose locations and intensity of land use. Consistent with evidence, the model implies exponentially decaying density and price gradients. For plausible parameter values, an increase in the demand for urban land can lead to a smaller increase in urban rents in cities that cannot expand physically because they are less able to exploit the positive external effect of greater employment density. ; Supersedes Working Paper 12-25.
Keywords: Land use;
Access Documents
File(s): File format is application/pdf https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2013/wp13-37.pdf
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Philadelphia
Part of Series: Working Papers
Publication Date: 2013
Number: 13-37