NOVAFRICA Seminar: Vernon Henderson, London School of Economics — “Economics of Greenfield Urban Planning”

How can urban planning balance efficiency, equity, and market forces in rapidly growing cities?

A new study based on a large-scale project in Dar es Salaam, Tanzania, explores how planning shapes property rights, land values, and social welfare in developing cities.

As part of the 2025/2026 NOVAFRICA Seminar Series, We are pleased to welcome Professor Vernon Henderson from the London School of Economics (LSE), on Friday, October 24, at 2:00 PM (Lisbon time) in Room D-010 at Nova School of Business and Economics, Carcavelos campus to present his paper:

“Economics of Greenfield Urban Planning”

Abstract:

Urban planning has shaped cities for millennia, demarcating property rights and mitigating coordination failures, but its rigidities often conflict with market-driven development, which reflects preferences. Although planning is widespread in high-income countries, rapidly growing cities in the developing world are characterized by urban informality. Despite its importance, urban planning lacks an economic framework to evaluate planners’ choices. This paper offers a starting framework and applies it to a flagship project in Dar es Salaam, Tanzania, which partitioned greenfield land on the urban fringe into more than 36,000 formal plots that people purchased and built homes on. To study this project, we assemble a novel dataset using admin istrative records, satellite imagery, and primary surveys. We develop and estimate a dynamic model in which planning design constrains the decisions of households of varying incomes to sort into formal areas. This model complements our reduced-form analysis, which uses within neighborhood variation and spatial RD to study planning choices’ effects. We find that the project secured property rights and access, raised land values relative to unplanned areas, and attracted highly educated owners. Within project areas, access to main paved roads, gridded layouts, and natural amenities are valued; plot development and public service provision have been slow; and the price elasticity of bare land with respect to plot size is-0.5. Counterfactual analysis using the model shows that while land value maximization involves the provision of larger plots, welfare maximization entails the provision of smaller plots to serve more lower income people.

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