The implications of a land value tax on urban agglomeration dynamics: Efficiency and equity

Cities have become widely recognised as pivotal hubs for economic growth, with continued evidence of productivity gains from density and proximity of agglomerations. However, the same externalities of dense urban agglomerations exert pressures on the built environments and are partially responsible for a deepening urban crisis (e.g., increasing wealth disparities, housing crisis), harming both equity and efficiency. While Land Value Taxation (LVT) is widely recognised for its potential to improve land use efficiency and affordability, its implications for agglomeration mechanisms remain overlooked. This article synthesises two largely disconnected bodies of literature—agglomeration theory and LVT—to open a debate on how taxing the unimproved value of land could realign incentives within rigid and exclusionary urban environments. Drawing on a systematic literature review and expert interviews, we identify a notable conceptual gap but strong theoretical compatibility. We argue that LVT can enhance the spatial, temporal, and interactive domains of agglomeration by internalising externalities where they arise. Integrating LVT into Agglomeration theory offers a coherent framework for addressing contemporary urban challenges while reinforcing the productivity benefits of urban concentration. By conceptualising LVT as a dynamic, spatially sensitive policy instrument, this article positions it as an underutilised yet powerful tool for enhancing urban efficiency, equity, and long-run agglomeration potential.