Managing Urban Sprawl (Working Paper)

The Effects of Land Use Externalities

Author(s): Irwin, Elena G. and Nancy E. Bockstael
Publication Date: July 2002

41 pages; Inventory ID CP02A14; English


Managing Urban Sprawl	673 KB

Abstract

This paper was written for and presented at a Lincoln Institute course titled, “Analysis of Land Markets and the Impact of Land Market Regulation,” held from July 10-12, 2002.

This paper includes comments from discussant, Annette M. Kim.

An overlooked aspect of urban sprawl is the fundamental connection between spatial economic decisions regarding land use at an individual level and the evolution of sprawl land use patterns at a regional level. These linkages arise in part from spatial externalities that generate interdependencies in the land use conversion decisions of neighboring landowners. We use an optimal timing of development model to investigate how neighborhood interaction effects, in the form of land use externalities, influence the land development decision and how the presence of such interaction effects complicate the effects of exogenous policies designed to manage growth. Detailed parcel-level data on land use change from a central Maryland region are used to estimate a hazard model of land use conversion that captures the influence of time-varying variables, including changes in neighboring land uses, on the rate of land conversion at a parcel level. The results of this model are used to test hypotheses regarding the direction and relative magnitudes of the interaction effects and to investigate the effect of policies designed to cluster development and preserve open space. The model is also used to investigate how interaction effects modify the outcome of a particular policy variable aimed at creating open space by clustering development. Simulations of alternative clustering policies are performed using the estimated parameters to explore the effects of the clustering policy on sprawl patterns of development.