The model suggests that policy interdependence arises because a city’s growth control decision is sensitive to the tightness of the regional housing market, which depends on the control choices of other cities. It is important to note that, while the results provide evidence of interaction, they do not prove that this particular mechanism is the source of it. For example, cities could instead be naive followers of localized policy “fads” in a setting of generalized hostility toward growth, which would generate results like those that have been found. Further research is needed to settle this issue.
Journal of Urban Economics