The fiscal trade-off: Sprawl, the conversion of land, and wage decline in California’s metropolitan regions

Abstract

Suburban jurisdictions are disproportionately likely to convert their land to land uses that maximize revenue generation. Yet, the jurisdictions that convert land to more fiscally lucrative uses are likely to experience gains in low-wage retail jobs – possibly contributing to poor upward mobility. This study offers a new perspective on both the factors behind and effects of the conversion of land use to sales taxable uses, via a unique dataset that identifies land use changes on 1.2 million parcels in California (from tax assessor data) from 2007 to 2013. After linking to data on compactness, municipal tax structure, and economic characteristics, the study examines first how various urban form and fiscal factors shape conversion (controlling for economic and demographic variables), and then how conversion to more fiscally lucrative uses (along with urban form and fiscal factors) affect net job quality, specifically wages, over time. Not only does fiscal structure, particularly municipal dependence on sales tax revenue, lead to the conversion of land to fiscally lucrative uses, controlling for other factors, it also contributes to wage decline. The more compact the urban fabric, the less likely is land use conversion, yet the greater the wage decline. The findings of this study suggest that land use conversion may thwart broader economic development goals.