Land use, spatial structure, and regional economic performance: assessing the economic effects of land use planning and regulation

Kim, Jaehong

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Description

Title

Land use, spatial structure, and regional economic performance: assessing the economic effects of land use planning and regulation

Author(s)

Kim, Jaehong

Issue Date

2010-05-14T20:42:50Z

Director of Research (if dissertation) or Advisor (if thesis)

Hewings, Geoffrey J.D.

Doctoral Committee Chair(s)

Hewings, Geoffrey J.D.

Committee Member(s)

• Deal, Brian M.
• Feser, Edward J.
• Donaghy, Kieran P.

Department of Study

Urban & Regional Planning

Discipline

Regional Planning

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Regional Economics
• Land Use Planning
• Land Use Regulation
• Property Market
• Integrated Modeling

Abstract

Although it has been readily acknowledged that regional economic growth and structural changes can directly affect land use patterns within the regions, little is known about the inverse: how a change or intervention in land use influences regional economic performance. Does land use planning or regulation promote a region's economic well-being? Alternatively, does this action raise barriers to development and thus slow the pace of economic growth or progress? Under what circumstances and how can we promote the potential contribution and/or minimize unexpected economic consequences of government interventions in land use? This dissertation research consists of the following three related studies that analyze the implications of land use planning and regulation for regional economic performance. The first study empirically examines the potential negative effects of strict land use regulations on local housing supply and household residential mobility. The second study looks at the potential contribution of land use planning to uncertainty reduction and the economically efficient use of land. The third study assesses the macroeconomic effects of reactive land use regulations, implemented by some suburban communities in the Chicago metropolitan area, using a new, improved simulation model. It is expected that the overall research provides better insights into the connections between regional economic shifts and land use changes and will eventually contribute to a more systematic coordination of land use policies and economic development initiatives. 1) Land Use Regulation and Intraregional Population-Employment Interaction: Land use regulation often delays the development process and increases the cost of development, although it may contribute to addressing market failures and realizing a well-organized spatial structure. Raising barriers to development may prevent households from responding to job relocations or job growth at certain locations in a timely manner, by restricting local housing supply. Further, this situation may result in longer commuting distances, times, and costs as well as greater spatial mismatches. To examine the possible adverse effect of the regulation, this study analyzes how intraregional population-employment interaction varies by metropolitan areas having different degrees of land use regulations. First, through a correlation analysis, the results reveal that highly regulated regions are likely to show a lower correlation between intraregional population and employment changes and an increasing mean commuting time between 1990 and 2000. In addition, a spatial econometric analysis using a regional disequilibrium adjustment framework suggests that intraregional population and employment changes may not be well integrated in highly regulated metropolitan areas due to the lower household mobility, even though households and businesses consider accessibility to each other importantly in their location choices. 2) Land Use Planning as Information Production & Exchange: Local governments' land use planning practice has been economically justified as an efficient means of producing and distributing necessary information relevant to land markets and further reducing the intrinsic uncertainties and transaction costs involved in land development processes. Although this way of justification, in addition to traditional welfare-economics-based rationales, has been adopted to give reason for land use planning, not much empirical evidence supporting the claim has been reported. In order to fill this gap, this study attempts to empirically validate the argument by focusing on a particular case, namely the urban fringe land markets where the farmland owners make decisions under uncertainties regarding the timing of potential land development for urban uses. First, through the exploration of land use data in Oregon, distinct farmland use patterns are found, consistent with the expectation that the establishment of urban growth boundaries (UGB) reduces uncertainty and therefore helps farmland owners make informed decision. Furthermore, cross-sectional regression analysis using 82 single-county MSAs' data detects a positive effect of UGB on agricultural investment levels, which may indicate the real contribution of the UGB to uncertainty reduction. The UGB's effect is found to be statistically significant in the MSAs showing relatively larger shares of livestock and fruit production (as opposed to crops) operations that generally require a greater amount of sunk costs and a longer period of operation for profits. 3) The Macroeconomic Effects of Suburban Reactive Land Use Regulations: A Simulation Study using a Spatial REIM (Regional Econometric Input-Output Model): This study assesses the macroeconomic effects of minimum-lot-size requirements and building permit caps that have been implemented by some of the suburban municipalities in the Chicago metropolitan area. This is accomplished by developing a new simulation model, which overcomes the shortcomings of traditional top-down approach to vertical regional economy – land use integration. The new framework captures local- and lower-level dynamics and their effects on regional economic performance by using a modified regional disequilibrium adjustment model that incorporates the intraregional dynamics into a regional econometric input-output model in a reciprocal, interactive manner, as opposed to a top-down allocation process. The model simulation results reveal that the reactive land use regulations (minimum lot size zoning and permit caps), which bind local housing supply and population growth within the jurisdictions, 1) dampen the pace of regional economic growth considerably, although the actions are sometimes favorable to the long-term prosperity of the individual implementing municipalities; 2) tend to generate disproportionate impacts on different sectors of the economy – i.e. local sectors, which heavily depend on household expenditures, are affected more strenuously; and 3) induce effects that vary substantially by location and timing of the implementation.

Graduation Semester

2010-5

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Copyright 2010 Jae Hong Kim

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