Working Paper: NBER ID: w11097
Authors: Edward L. Glaeser; Joseph Gyourko; Raven E. Saks
Abstract: Cities are physical structures, but the modern literature on urban economic development rarely acknowledges that fact. The elasticity of housing supply helps determine the extent to which increases in productivity will create bigger cities or just higher paid workers and more expensive homes. In this paper, we present a simple model that provides a framework for doing empirical work that integrates the heterogeneity of housing supply into urban development. Empirical analysis yields results consistent with the implications of the model that differences in the nature of house supply across space are not only responsible for higher housing prices, but also affect how cities respond to increases in productivity.
Keywords: Urban Growth; Housing Supply; Elasticity of Housing Supply; Land Use Regulation
JEL Codes: R0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| elastic housing supply (R31) | increase in population (J11) |
| elastic housing supply (R31) | modest increases in housing prices (R31) |
| inelastic housing supply (R31) | significant increases in housing prices (R31) |
| inelastic housing supply (R31) | little change in population (J11) |
| labor demand shocks (J23) | increase in population in elastic areas (J11) |
| labor demand shocks (J23) | larger increases in wages and housing prices in inelastic areas (J39) |
| land use regulations (R52) | housing supply elasticity (R21) |
| housing supply elasticity (R21) | urban dynamics (R11) |