Determinants of Efficient Growth Boundaries with Balanced Budgets and Stochastic Rents

This article investigates how uncertainty in urban rents affects an efficient growth boundary designed by a regulator who prices a congestible public good at the average cost. A landowner decides the timing of development and competes with the regulator in a dynamic Stackelberg game. The regulator anticipates this timing decision and dynamically adjusts the growth boundary accordingly. The regulator should slacken the boundary control as urban rents pass their historically high levels, which is consistent with the existing land-use planning systems. The regulator should also design a smaller urban growth boundary if uncertainty arises because uncertainty will induce the landowners to postpone development.