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Journal of Economic Geography Advance Access published online on August 31, 2009
Journal of Economic Geography, doi:10.1093/jeg/lbp039
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© The Author (2009). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Land use regulation with durable capital

John M. Quigley* and Aaron M. Swoboda**,{dagger}

*University of California, Berkeley, CA, 94720-3880 USA.
**Carleton College, Northfield, MN, 55057 USA.

{dagger}Corresponding author: Aaron M. Swoboda, Carleton College, Northfield, MN, 55057 USA. email <aswoboda{at}carleton.edu>

JEL classifications: L51, R14, O21

This article compares the level and distribution of the welfare changes from restricting land available for residential development in a city. We compare the economic costs when residential capital is durable with the costs when capital is perfectly malleable and those when population is also freely mobile. Our simulation, based on the stylized specification of an urban location model, suggests that in a more realistic setting with durable capital, the costs of regulation are substantially higher than they are when capital is assumed to be malleable or when households are assumed to be fully mobile. Importantly, the extent of wealth redistribution attributable to these regulations is much larger when these more realistic factors are recognized. When capital is durable, the results also imply that far more new development takes place on previously undeveloped land at the urban boundary, sometimes resulting in an increase in total land under development.

Keywords: malleable capital, durable capital, open city, closed city
Date submitted: 8 October 2008     Date accepted: 6 July 2009


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