Why Oppose TDRs?:
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Transferable Development Rights Can Increase Overall Development
Economists have long argued that systems of marketable permits are a
cost-effective means of regulating externalities. Though these ideas have only
recently been implemented in the field of pollution control, transferable
development rights (TDRs) have been used for decades by city planners in many
locales. Most opponents of permit trading contest the granting of property
rights to the originators of harmful effects on ethical grounds, and rarely
argue that such schemes increase the total external harm. This paper formalizes
the second argument by showing that in a partial equilibrium model of urban
zoning, replacing a uniform height zoning rule with a TDR system can lead to
greater overall development.
Key words: Transferable development rights; marketable permits; zoning.
JEL classification: R1; R52; H23.
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