A new interpretation on the optimal density regulations: Closed and open city |
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| Authors: | Tatsuhito Kono Kirti Kusum Joshi |
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| Institution: | 1. University of Cambridge, United Kingdom;2. University of Amsterdam, Netherlands;3. Tinbergen Institute, Netherlands;4. CPB Netherlands Bureau for Economic Policy Analysis, Netherlands;5. Eindhoven University of Technology, Netherlands;6. Vrije Universiteit Amsterdam, Netherlands;1. UCLA and NBER, 8283 Bunche Hall, UCLA, Los Angeles, CA 90095, United States;2. Columbia University, New York, NY 10027, United States;1. The Robert Day School of Economics and Finance, Claremont McKenna College, Claremont, CA 91711, United States;2. Department of Economics, University of Southern California, Los Angeles, CA 90089, United States;3. Department of Finance and Business Economics, Marshall School of Business, University of Southern California, Los Angeles, CA 90089, United States |
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| Abstract: | Optimality of urban density regulations differs between a closed city and an open city. We demonstrate, by examining optimal floor area ratio (FAR) regulation, how to control building size to mitigate traffic congestion externality in a monocentric city. Results show that a closed city requires not only downward adjustment to the market density at boundary locations using maximum FAR regulation but also upward adjustment at central locations using minimum FAR regulation. On the other hand, an open city requires only the former. The common practice of imposing only maximum FAR regulation is thus insufficient for closed cities although it is effective for open cities. |
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