Second-best urban tolls in a monocentric city with housing market regulations

Ioannis Tikoudis*, Erik T. Verhoef, Jos N. van Ommeren

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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This paper investigates second-best congestion pricing in a monocentric city characterized by distortionary regulations in the housing market (building height restrictions, no-development areas and property taxation). We demonstrate that the welfare gain of a Pigouvian tax may first fall and then increase as building height restrictions become more stringent. For example, a Pigouvian toll imposed in a city without restrictions may produce up to 40% larger welfare gains than Pigouvian tolling in a city with a mild, uniform in space, floor-to-area ratio restriction. In the presence of a tax-induced distortion, deviations of the Pigouvian toll can lead to non-negligible welfare gains. We discuss the important policy implications of the above findings.

Original languageEnglish
Pages (from-to)342-359
Number of pages18
JournalTransportation Research Part B: Methodological
Issue numberPart A
Publication statusPublished - 2018


  • Building height restrictions
  • Cost-benefit analysis
  • Floor-to-area ratio regulations
  • Monocentric city
  • No-development areas
  • Property tax
  • Road pricing

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