Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 566: Spatial Policies and Land Use Patterns: Optimal and market allocations
Efthymia Kyriakopoulou () and Anastasios Xepapadeas ()
Additional contact information
Efthymia Kyriakopoulou: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Anastasios Xepapadeas: Dept of International and European Economic Studies, Athens University of Economics and Business
Abstract: Environmental conditions and pollution levels have been proven to affect firms' and households’location decisions in various ways. In this paper, we study the optimal and equilibrium distribution of industrial and residential land in a given region. Industries produce a single good using land and labor and generate emissions of a pollutant, and households consume goods and residential land and dislike pollution. The trade-off between the agglomeration and dispersion forces, in the form of industrial pollution, environmental policy, production externalities, and commuting costs, determines the emergence of industrial and residential clusters across space. We also show that the joint implementation of a site-specific environmental tax and a site-specific labor subsidy can reproduce the optimum as an equilibrium outcome.
Keywords: Agglomeration; land use; spatial policies; pollution; environmental tax; labor subsidy
41 pages, May 22, 2013
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