Working Paper: NBER ID: w21154
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 to new 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 more than 50% from 1964 to 2009.
Keywords: Spatial Misallocation; Housing Supply Constraints; Economic Growth
JEL Codes: E24; J01; R0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stringent housing supply constraints in high productivity cities (R38) | spatial misallocation of labor (J69) |
| spatial misallocation of labor (J69) | lower aggregate output and welfare across all U.S. cities (R11) |
| stringent housing supply constraints in high productivity cities (R38) | lower aggregate output and welfare across all U.S. cities (R11) |
| increased spatial misallocation due to housing supply constraints (R31) | significant reduction in U.S. growth (O51) |
| local housing supply elasticity influences local shocks in productivity (J69) | national output and welfare (D69) |