Nuisance zoning,the labor market and capital gain

Setting a two-generation model of current and new residents in a simple linear city, this paper analyzed the effects of nuisance zoning on urban system. In the model, decisive agents of zoning regulation (current residents) behave not only as consumers of land service affected by nuisance externality, but as investors of land for capital gain. We emphasize that this paper analyzed the zoning effect on labor market and thus on the wage level as well as on land market. It is shown that under the optimal zoning to maximize the welfare of current residents, the sum of the value of marginal disutility due to expanded industry-operation district for both current and new residents is just equal to the increased total wage income for new residents.The original version of this paper was presented at the annual meeting of Applied Regional Science Conference and at the Urban Economies Workshop of Kyoto University. We thank the participants of both meetings, and the editor and two anonymous referees of this journal for their useful comments. This research was supported in part by Grant-in-Aid for Scientific Research (C), which is gratefully acknowledged.Received: January 2003/Accepted: September 2003