Optimal policies in cities with congestion and agglomeration externalities: Congestion tolls, labor subsidies, and place-based strategies

摘要: Abstract This paper develops a spatial general equilibrium model that accommodates both congestion and agglomeration externalities, while firms’ households’ land-use decisions are endogenous across continuous space. Focusing on the interaction between externalities land use patterns, we examine efficiencies of first-best policies second-best pricing place-based strategies using numerical simulations. A policy must combine Pigouvian tolling (PCT) labor subsidies (PLS) instruments, or design an optimal toll (or subsidy) internalizing externalities). We also if only one instrument is adopted. Congestion alone (e.g., partial PCT flat-rate toll) can improve social welfare in heavy-congestion cities, their gains may be insignificant below 10% improvement achieved by policies). In contrast, subsidy more effective alternative to policies. As policies, firm cluster zoning (FCZ) regulation efficient than urban growth boundary (UGB) policy. UGBs have small effects economy but could worsen market distortions via residential rent-escalation effects. These findings suggest it important internalize business relax monocentricity assumptions, order appreciate interplay since adaptations interventions distort system efficiencies.