Working Paper: CEPR ID: DP12912
Authors: Changtai Hsieh; Enrico Moretti
Abstract: We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs.Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions tonew housing supply, effectively limiting the number of workers who have access to such high productivity.Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by 36% from 1964 to 2009.
Keywords: Spatial Misallocation; Housing Constraints; Labor Economics; Aggregate Growth
JEL Codes: N/A
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| housing constraints in high productivity cities (R38) | spatial misallocation of labor (J69) |
| spatial misallocation of labor (J69) | aggregate US growth (O40) |
| housing constraints in high productivity cities (R38) | housing prices and nominal wages (R31) |
| relaxing housing restrictions to median US city level (R28) | growth rate of aggregate output (O40) |
| relaxing housing restrictions to median US city level (R28) | GDP in 2009 (P24) |
| aggregate GDP growth (O40) | contribution of high productivity cities to aggregate GDP growth (O49) |
| misallocation effect (D61) | apparent contribution of productivity growth to overall economic performance (O49) |