How well do urban growth boundaries contain development? Results for Oregon using a difference-in-difference estimator

Urban containment policies, including urban growth boundaries (UGBs), are a common tool used by city planners to promote compact development. We analyze how well UGBs do in containing development using fine-scale GIS data on cities in Oregon. Earlier studies on UGBs yield mixed results, with some authors finding no effects of UGBs on housing market variables and urbanization rates and others finding significant effects. A challenge in measuring these effects is that the location of the UGB is unlikely to be an exogenous determinant of a land parcel's value for development. The panel structure of our dataset allows us to estimate the UGB's effect on the probability of development using a difference-in-difference estimator applied to a narrow band of plots along each city's UGB. This estimator controls for time-invariant unobservable variables and common temporal effects among plots, thereby mitigating the potential for biased estimates due to the endogeneity of the UGB's location. We also pursue a novel approach to controlling for time-varying factors that exploits our fine-scale data. We find that UGBs contain development in many of the Oregon cities we examine, although there are some cities in which development rates are the same inside and outside of the UGB. Our results reveal that, in most cities, the effect of the UGB is small relative to pre-existing differences in development probabilities. This suggests that it may be difficult to identify UGB effects with cross-sectional data, the approach commonly taken in previous studies. (C) 2013 Elsevier B.V. All rights reserved.