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Regulation versus Taxation

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  • Hirte, Georg
  • Rhee, Hyok-Joo

Abstract

We examine the working mechanisms and efficiencies of zoning (regulation of floor area ratios and land-use types) and fiscal instruments (tolls, property taxes, and income transfer), and extend the instrument choice theory to include the congestion of road and nonroad infrastructure. We show that in the spatial model with heterogeneous households the standard first-best instruments do not work because they trigger distortion of spatial allocations. In addition, because of the household heterogeneity and real estate market distortions, zoning could be less efficient than, as efficient as, or more efficient than pricing instruments. However, when the zoning enacted deviates from the optimum, zoning not only becomes inferior to congestion charges but is also likely to reduce welfare. In addition, we provide a global platform that extends the instrument choice theory of pollution control to include various types of externalities and a wide range of discrete policy deviations for any reasons beyond cost–benefit uncertainties.

Suggested Citation

  • Hirte, Georg & Rhee, Hyok-Joo, 2016. "Regulation versus Taxation," CEPIE Working Papers 05/16, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    • Handle: RePEc:zbw:tudcep:0516
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    File URL: https://www.econstor.eu/bitstream/10419/146772/1/CEPIE_WP_05_2016.pdf
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    Cited by:

    1. Hirte, Georg & Tscharaktschiew, Stefan, 2018. "The impact of anti-congestion policies and the role of labor-supply margins," CEPIE Working Papers 04/18, Technische Universität Dresden, Center of Public and International Economics (CEPIE).

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    More about this item

    Keywords

    infrastructure congestion; zoning; road tolls; property tax; instrument choice; heterogeneity; Infrastruktur; Verkehrsstau; Zoning; Maut; Grundsteuer; Heterogenität;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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