This paper evaluates the efficacy of the urban growth boundary (UGB) as a second-best substitute for a first-best toll regime in a congested city. Numerical results show that, while a UGB is welfare-improving, validating previous theoretical results, the utility gain it generates is a very small fraction of that achieved under a toll regime. Thus, the paper suggests that a UGB may not be a useful instrument for attacking the distortions caused by unpriced traffic congestion. © 2007 Elsevier Inc. All rights reserved.
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