The Effect of Transportation and Housing Subsidies on Urban Sprawl

Abstract

Abstract This paper analyses theoretically the effect of transportation and housing subsidies on urban sprawl, modal choice decisions and urban spatial structure using a spatial general equilibrium model in a monocentric city with two transport modes. Our analysis shows that public transit subsidy leads to urban shrink, whilst subsidizing automobile and housing make the city sprawl. We also find the effects of the other factors on urban sprawl, such as households income and demand, rural land rent, the income tax rate, the total fixed cost of public transit and automobile and the travelling marginal cost of public transit and automobile. Furthermore, this paper also studies how to maximize the urban-area-wide spatial equilibrium utility level.