Tarnishing the golden and empire states: Land-use restrictions and the U.S. economic slowdown

Kyle F. Herkenhoff, Lee E. Ohanian, Edward C. Prescott

Research output: Contribution to journalArticle

6 Scopus citations

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, account for much of these gains.

Original languageEnglish (US)
Pages (from-to)89-109
Number of pages21
JournalJournal of Monetary Economics
Volume93
DOIs
StatePublished - Jan 2018

Keywords

  • Capital reallocation
  • Growth
  • Land regulation
  • Migration
  • Productivity
  • Spatial general equilibrium

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