What Makes Mixed-Use Development Economically Desirable?

Mixed-use development has been widely advocated by urban planners as an important planning tool for sustainable urban development. However, despite the fact that mixed land use is commonly observed in cities, it has not been well defined or explained in existing urban economic theories. Although several researchers have attempted to theorize the phenomenon using congestion and agglomeration and externality effects, their efforts are based on highly abstract neoclassical economic models. While these models help to conceptualize mixed land use in theory, the neoclassical approach overlooks the institutional and organizational aspects of the land development process. Moreover, there is an enormous gap between these theoretical models and real-world practices where decisions on mixed-use development must be made on the basis of context-specific considerations. This paper has three objectives. The first is to clarify the concept and develop a typology of mixed land use based on a review of academic and professional publications. The second objective is to review and critique the existing literature aimed at bridging economic theories with mixed-use practices. The third objective is to employ the transaction cost economic theory as an alternative framework to comprehend mixed-use development. The paper can inform future planning and development decisions on mixed land use.