locations where land is cheap. Thus, the government ought to make subsidies “portable” and allow low income households to make the trade‐off between land use standards, transport costs and location. Similarly, emphasis on minimum floor space (or FAR) and infrastructure and not on minimum land consumption should help correct the distortion in land consumption.<sup>88</sup> Land use policies can be strengthened with complementary transport policies to reach spatially optimal outcomes. A reduction in the cost of commute brings the equilibrium allocation closer to the optimal one through, (i) a direct reduction in workers costs per mile commuted and (ii) an indirect effect via the concentration of business areas. Policies to bring workers closer to job, such as those on road construction and improving public transportation should also consider this latter indirect additional gain in their cost‐ benefit analysis.<sup>89</sup> Esteban Rossi‐Hansberg’s model suggests that policies on parking lots construction, highway investments which reduce the costs of working at business centers, are much needed to align the city structure with optimal allocation of land use.<sup>90</sup> These transport related policies are in essence similar to a government subsidy that lowers the labor costs for firms and motivates them to hire more workers has a positive impact on wages and rents.<sup>91</sup> In response to increases in rents, workers move out of prime locations, thereby making equilibrium allocation more concentrated and hence an optimum one.

In contemporary cities in the USA, about three quarters of the jobs are dispersed outside the sub‐centers and the CBD. Studies on developed countries conclude that agglomeration economies are possibly metropolitan in scale.<sup>92</sup> Thus, the continued productive edge of cities is largely dependent on the ready availability of public transit and private automobiles that allow workers to reach out better and more productive economic opportunities available throughout metropolitan area. Such a model of dispersed employment may be acceptable in developed countries where car ownership rates are high and public transit systems are efficiently placed. However, for cities in low income countries, dispersion in employment is actually counter‐productive because of lack of a well‐organized public transit system, extremely low car ownership rates and poor road infrastructure. Developing countries may want to focus on policies that promote concentration of economic activity at the center or sub‐centers and build infrastructure connectivity to and from such centers. Policies promoting metropolitan‐wide connectivity and those that permit speedier and longer commuting would to aid agglomeration of firms and relocation of workers within tolerable commute range.<sup>93</sup> Once zoning regulations, UGBs and transport policies can mitigate the problem of dispersed employment, agglomeration among firms is likely going to raise the productivity of the city as a whole and perhaps even attract more productive economic opportunities. At some point, congestion externalities would kick in

> 88 Bertaud (2009)

> 89 Rossi‐Hansberg (2004)

> 90 Studies that evaluate the cost of congestion and the policies for reducing such costs include ‐ Anas and Xu (1999); Wheaton (1998). Such policies may have similar effects.

> 91 We find similar suggestions in Kyriakopoulou and Xepapadeas (2013) as well.

> 92 See Burger et al. (2009); Gordon and McCann (2000); Johansson and Quigley (2004) and Angel and Blei (2015a) 93 Angel and Blei (2015b)

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