Counteracting inefficient urban development – an analysis of the negative effects of urban sprawl

Abstract

Urban sprawl refers to the spatial expansion of cities, typically as a result of an increased demand for low-density residential areas. The OECD has identified urban sprawl as a key policy concern in the coming decades due to the global trend of urban living. This literature review aims to study the externalities of urban sprawl and highlight some of the tools economists have at their disposal in addressing the phenomenon.

While urban sprawl offers numerous advantages to individuals such as larger and cheaper dwellings, it results in externalities such as congestion, air pollution, and social inequality. Many of the externalities associated with sprawl are not perceived by economists as relevant or challenging. Inefficient land use and car-based externalities have received the most attention.

Land value taxation is the most effective measure in discouraging sprawl, but gasoline taxation offers an interesting alternative as it targets the main externalities more directly, without necessarily reducing the consumption benefits of sprawl. The future relevance of the study of sprawl is largely dependent on the development of transportation technology, as many of the externalities associated with sprawl would be largely eliminated by greener transport.