DP14546 The Welfare Effects of Greenbelt Policy: Evidence from England

Author(s):	Hans R.A. Koster
Publication Date:	March 2020
Date Revised:	September 2020
Keyword(s):	Gravity, greenbelts, Housing, open space, supply constraints, urban growth boundary
JEL(s):	G10, R30
Programme Areas:	Public Economics, International Trade and Regional Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=14546

I measure the economic effects of greenbelts that prohibit new construction beyond a predefined urban fringe and therefore act as urban growth boundaries. I focus on England, where 13% of the land is designated as greenbelt land. I estimate a quantitative general equilibrium model that includes amenities, housing construction, a traffic congestion externality, agglomeration forces, productivity and household location choices. To identify causal effects of greenbelt land, I construct counterfactual greenbelts, use greenbelt land in 1973, or focus on areas within a km of greenbelt boundaries. Greenbelt policy appears to generate positive amenity effects, but also strongly reduces housing supply. I find the greenbelts seem to increase welfare, as the equivalent income increase of workers is 0.3% and land rents increase by about 6.5%. Whether greenbelts benefit workers critically depends on the presence of spillovers and greenbelt amenities.