THE ECONOMICS OF LAND-ZONING
Land-use restrictions are frequently applied to separate polluting from non-polluting activities. In contrast to the existing literature, we incorporate spatial and intertemporal aspects of the problem simultaneously and determine the border of the zones endogenously. The results, based on a two-stage optimization method, show that non-spatially differentiated Pigouvian taxes on the final emissions are able to establish the socially optimaloutcome.