Public goods and congestion in a system of cities: How do fiscal and zoning policies improve efficiency?

How can fiscal and density-zoning instruments help finance local public goods, while mitigating congestion in a general equilibrium system of cities? The literature-based on the model of a single monocentric city with congestion but no public good-shows core densities increasing and total land area decreasing if Pigouvian tolls or urban growth boundaries (UGBs) are used. In the utility-improving regimes of our setup, including tolls or the UGB, core densities are lowered in each city but more and smaller cities emerge at long-run equilibrium. If lot size and other goods are sufficiently complementary in consumption, it is optimal that total land area increases in the aggregate even as congestion tolls or the UGB decrease the total area of each city. Density zoning is either redundant or achieves first-best efficiency depending on the fiscal instruments present.