Urban Growth Externalities and Neighborhood Incentives: Another Cause of Urban Sprawl?

This paper suggests a cause of low density in urban development or urban sprawl that has not been given much attention in the literature. There have been a number of arguments put forward for market failures that may account for urban sprawl, including incomplete pricing of infrastructure, environmental externalities, and unpriced congestion. The problem analyzed here is that urban growth creates benefits for an entire urban area, but the costs of growth are borne by individual neighborhoods. An externality problem arises because existing residents perceive the costs associated with the new residents locating in their neighborhoods, but not the full benefits of new entrants which accrue to the city as a whole. The result is that existing residents have an incentive to block new residents to their neighborhoods, resulting in cities that are less dense than is optimal, or too sprawling. The paper models several different types of urban growth, and examines the optimal and local choice outcomes under each type. In the first model, population growth is endogenous and the physical limits of the city are fixed. The second model examines the case in which population growth in the region is given, but the city boundary is allowed to vary. We show that in both cases the city will tend to be larger and less dense than is optimal. In each, we examine the sensitivity of the model to the number of neighborhoods and to the size of infrastructure and transportation costs. Finally, we examine optimal subsidies and see how they compare to current policies such as impact fees on new development.Externalities, Urban Growth, Optimality, Policies, Taxation

Coase and Car Repair: Who Should Be Responsible for Emissions of Vehicles in Use?

This paper examines the current assignment of liability for in-use vehicle emissions and suggests some alternative policies that may reduce the cost and increase the effectiveness. The authors first discuss the cost, performance and incentives under current Inspection and Maintenance (I/M) programs, using the recently implemented Arizona "Enhanced I/M" program as an example. These programs were designed to identify and repair vehicles with malfunctioning emission control systems. Since their inception, however, I/M programs have been plagued by transaction costs that have drastically raised the cost of I/M as well as limited its effectiveness. These transaction costs fall into three categories: emission monitoring, repair avoidance, and non-transferability of emission reductions. The authors argue that most of these transaction costs can be attributed to the current assignment of liability for I/M to motorists, and they examine the potential for other liability assignments to reduce transaction costs and improve program efficiency. Among the alternative institutional arrangements discussed are greater imposition of liability on manufacturers, emission repair subsidies, repair liability auctions, and vehicle leasing.

Incentive-Based Land Use Policies and Water Quality in the Chesapeake Bay

Abstract The activities conducted on land surrounding the Chesapeake Bay directly affect pollution levels in the Bay, and they do so in complex and varied ways. Policy attention has been focused, for the most part, on modifying these activities within a particular land use category but not on wholesale changes in land use. For example, farmers are encouraged to use “best management practices” (BMPs) that focus on fertilizer use, crop covers, and the like; residential and commercial developers are encouraged to manage stormwater runoff; and wastewater treatment plants are required to meet technology-based standards. But the amount of land in urbanized uses relative to the amount in farming, forestry, and open space has not been given the attention it deserves. In this paper, we discuss the ways that land use affects pollution in the Bay. We then analyze three economic incentive-based policies that could be used to alter land use patterns—purchase of development rights (PDRs), transferable development rights (TDRs), and development impact fees. The strengths and weaknesses of each policy are discussed. Finally, we discuss the issue of policy coordination, i.e., synchronizing policies focused directly on land use, such as TDRs, with input-based taxes. More research on this important policy issue is needed.development impact fees, nonpoint source pollution, purchase of development rights, transferable development rights

Estimating Full IM240 Emissions from Partial Test Results: Evidence from Arizona

The expense and inconvenience of enhanced vehicle emissions testing using the full 240-second dynamometer test has led states to search for ways to shorten the test process. In fact, all states that currently use the IM240 allow some type of fast-pass, usually as early in the test as second 31, and Arizona allows vehicles to fast-fail after second 93. While these shorter tests save states millions of dollars in inspection lanes and driver costs, there is a loss in information since test results are no longer comparable across vehicles. This paper presents a methodology for estimating full 240 second results from partial-test results for three pollutants: HC, CO and NOx. Using random sample of vehicles in Arizona which received full 240 second tests, we use regression analysis to estimate the relationship between emissions at second 240 and emissions at earlier seconds in the test. We examine the influence of other variables such as age, model-year group, and the pollution level itself on this relationship. We then use the estimated coefficients in several applications. First, we attempt to shed light on the frequent assertion that the results of the dynamometer test provide guidance for vehicle repair of failing vehicles. Using a probit analysis, we find that the probability that a failing vehicle will passing the test on the first retest is greater the longer the test has progressed. Second, we test the accuracy of our estimates for forecasting fleet emissions from partial test emissions results in Arizona. We find that forecast fleet average emissions are very close to the actual fleet averages.

Zoning, TDRs, and the Density of Development

Many communities on the urban fringe are implementing a range of policies to preserve farmland and open space, cluster residential development, and guide development to areas with existing infrastructure. These efforts are an attempt to control overall growth and the concomitant loss in open space and also to counter a trend toward the so-called large lot development that often takes place in these areas. Planners have argued that policies to manage density are the most important local policy focus for urban areas in the coming years. It is possible that large lot development and sprawl are themselves the result of government policy. Most local governments use zoning to establish minimum acreage requirements for each residential dwelling unit; in ex-urban localities, these limits are often quite high. Developers might build a subdivision with average lot sizes greater than the minimum but they cannot by law go below it. Some researchers have argued, however, that the spatial patterns of development are simply the natural result of household preferences and market forces. In this paper, we address the question of whether zoning limits are the primary cause of lowdensity, sprawling development or whether market forces tend to dictate this outcome. If zoning limits account for low-density development in at least some cases, how would development patterns be different if there had been no such rules? We begin by constructing a simple model of the developer decision about the density of new development. The subdivision is the unit of observation, and developers must weigh both demand and cost considerations in choosing density, in addition to complying with zoning restrictions that vary across parcels. We apply the model using parcel-level data from a region where zoning rules vary but are exogenous to the period under study. Calvert County, Maryland, near Washington, DC, is an historically rural county that has experienced rapid growth in recent years. The county has a transferable development rights (TDRs) program that has led to a great deal of variability in the intensity of development across properties. We are able to not only examine the extent to which zoning has contributed to large lot development but also to determine the economic forces that underlie density decisions. Finally, we are able to forecast how density would have been different in the absence of zoning rules by estimating a Tobit equation that is censored for the observations constrained by zoning.housing density, zoning, transferable development rights

Making Markets for Development Rights Work: What Determines Demand

Many economists see current land use patterns as inefficient due to various market failures, and planners argue that current patterns do not follow sound planning practice. One policy of interest to both groups is transferable development rights (TDR). TDRs allow the development rights from land that is preserved in an undeveloped state to be transferred to other areas where development can be made denser. This paper addresses one of the greatest difficulties TDR programs face—insufficient demand. We develop a simple theoretical model and estimate a TDR demand function using data from Calvert County, Maryland, one of the only regions where data on individual sales are available. We find that baseline zoning is a critical determinant of TDR demand—demand is high in low-density rural areas but not in the relatively high-density residential areas. We also identify many subdivision characteristics that are significant in explaining TDR use.TDRs, density, zoning, subdivisions

Lot Size, Zoning, and Household Preferences: Impediments to Smart Growth?

The paper explores a number of issues related to lot size and urban density. First, trends in single-family residential lot size over the past 35 years are examined in eight counties in the state of Maryland. We find that there was a trend toward larger lot sizes in many suburban counties in the mid to late 1990s, and that there has been a general flattening of the density gradient in urban areas over the last few decades. We then examine the extent to which lot size is being constrained by regulation by comparing actual subdivision density to the allowable density under zoning rules. This analysis is done for three counties with different degrees of suburbanization. We find that only in the areas with the very large lot zoning does zoning seem to be constraining actual lots size. There is a good deal of excess capacity in the density that could be built, especially in the more densely zoned areas. Finally, recognizing that households have preferences for lot size and other housing characteristics, we provide some evidence about the strength of household preferences over lot size and their willingness to trade off lot size for other characteristics.land use, urban sprawl, density, lot size

Efficiency and Political Economy of Pollution Control with Ancillary Benefits: An Application to NOx Control in the Chesapeake Bay Airshed

This paper examines implications for cost-effective allocation of pollution controls when preferences of coalitions organized along regional lines, or according to preferences for air vs. water quality improvements, are accounted for. Results are compared to a base case in which NOx emissions reductions must satisfy only a water quality standard, and total costs are minimized over emissions sources. Relative to base-case result that marginal control costs must be equal across sources, stronger relative preferences for air imply shifting of control toward sources that produce greater ancillary benefits to air quality. Regional differences may require side payments to induce cooperation where benefits are low, but this will not affect how controls themselves should be allocated.

Costs, Emissions Reductions and Vehicle Repair: Evidence from Arizona

The Arizona I/M program provides one of the first opportunities to examine the costs and effectiveness of vehicle emission repair. This paper examines various aspects of emission reductions, fuel economy improvements, and costs of repair, drawing data from over 80,000 vehicles failing the I/M test in Arizona between 1995 and the first half of 1996. We summarize the wealth of repair data from the Arizona program and highlight its limitations. Because missing or incomplete cost information has been a serious shortcoming for evaluation of I/M programs, we develop a method for estimating the costs of repair when those costs are not reported. We find surprising evidence that almost one quarter of all vehicles that take the I/M test are never observed to pass the test. Using a statistical analysis, we provide some information about the differences between the vehicles that pass and those that do not. Older, more polluting vehicles are much more likely to never pass the I/M test, and their expected costs of repair are much higher than those of new cars. The paper summarizes the evidence on cost and emission reduction in the Arizona program, comparing costs and emission reductions for both cars and trucks. Finally, we examine the potential for more cost-effective repair, first through an analysis of tightening I/M cutpoints, and then by calculating the cost savings of achieving different emission reduction goals when the most cost effective repairs are made first.

A Behavioral Analysis of EPA's MOBILE Emission Factor Model

This paper examines the behavioral and stochastic aspects of modeling emission reductions from vehicle Inspection and Maintenance (I/M) programs. Forecasts of the potential emission reductions from such programs have been modeled by the use of the Environmental Protection Agency's MOBILE Model, EPA's computer model for estimating emission factors for mobile sources. We examine the structure of this Model and review the way behavior of drivers, mechanics and state regulatory authorities is incorporated in the current generation of the Model. We focus particularly on assumptions about vehicle repair under I/M, compliance with I/M requirements, and the impact of test measurement error on predicted I/M effectiveness. We also include some preliminary comparisons of the Model's outcomes to results of the I/M program in place in Arizona. Finally, we perform some sensitivity analyses to determine the most influential underlying parameters of the Model. We find that many of the assumptions of the I/M component of the Model are based on relatively small data sets on vehicle done in a laboratory setting, and that the output of the Model makes it difficult to compare the results against real world data from on-going state programs. In addition, the Model assumes that vehicles will either be repaired or receive a waiver. In the Arizona program there appears to be a third category of vehicles � those which fail the test and do not receive passes. This share may be as high as a third of all failing vehicles. Vehicles which do not eventually pass the test would be treated in the Model as non-compliant. However, in current programs, states do not seem to be measuring and entering the compliance rate correctly. The paper also examines the evidence about whether emissions deteriorate over the life of vehicle in a grams per mile basis (as assumed by the Model) or a grams per gallon basis. It finds support for the argument that emissions deteriorate on a grams per gallon basis. We find through sensitivity analysis that the repair effectiveness assumed by the Model to occur in an IM240 test are much greater than for the idle test, and that identification rates and repair effectiveness vary a great deal according to the cutpoint. These results are based on small numbers of vehicle tests in a laboratory setting and could be compared to real world evidence. Examining costs and cost-effectiveness of variations in I/M programs is important for determining improvements in I/M programs. States may not have incentives to develop cost-effective programs based on current Model that forecast emission reduction "credits" that are overly optimistic.