Working Paper: NBER ID: w23790
Authors: Kyle F. Herkenhoff; Lee E. Ohanian; Edward C. Prescott
Abstract: This paper studies the impact of state-level land-use restrictions on U.S. economic activity, focusing on how these restrictions have depressed macroeconomic activity since 2000. We use a variety of state-level data sources, together with a general equilibrium spatial model of the United States to systematically construct a panel dataset of state-level land-use restrictions between 1950 and 2014. We show that these restrictions have generally tightened over time, particularly in California and New York. We use the model to analyze how these restrictions affect economic activity and the allocation of workers and capital across states. Counterfactual experiments show that deregulating existing urban land from 2014 regulation levels back to 1980 levels would have increased US GDP and productivity roughly to their current trend levels. California, New York, and the Mid-Atlantic region expand the most in these counterfactuals, drawing population out of the South and the Rustbelt. General equilibrium effects, particularly the reallocation of capital across states, accounts for much of these gains.
Keywords: land-use restrictions; economic activity; GDP; productivity; counterfactual experiments
JEL Codes: E24; E3; E6; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tighter land-use regulations (R52) | decrease in macroeconomic activity (E32) |
| deregulating urban land back to 1980 levels (R52) | increase in US GDP (E20) |
| deregulating urban land back to 1980 levels (R52) | increase in consumption (E21) |
| deregulating urban land back to 1980 levels (R52) | reallocation of capital across states (H73) |
| reallocation of capital across states (H73) | gains in output and welfare (D69) |