Local urban growth controls and regional economic growth

Local land use regulations have been adopted to restrict population growth and urban sprawl in an attempt to prevent future problems like congestion, pollution, and loss of open space. However, when regulations become widespread in a region, it can be difficult for young workers and newcomers to find appropriate housing in the region. Because local governments may neglect the effects of their policies on the rest of the region, the resulting population size can be inefficient. We show that local adoption of housing regulations tends to over-restrict population growth when there are strong agglomeration economies in the regional production. On the other hand, when there is congestion in production, coordination among jurisdictions is undesirable if business interests are neglected.