Housing Bubbles and Zoning Corruption: Evidence from Greece and Spain

49 Pages Posted: 13 Dec 2015

See all articles by Antonis Koumpias

Antonis Koumpias

Georgia State University - Andrew Young School of Policy Studies

Jorge Martinez-Vazquez

Georgia State University - Andrew Young School of Policy Studies

Eduardo Sanz-Arcega

University of Zaragoza - Faculty of Business and Economics

Date Written: November 8, 2015

Abstract

The adoption of the euro in 2002 led to an unprecedented supply of cheap mortgage credit in Greece and Spain. The housing bubbles that ensued amplified developers' incentives to offer bribes for illegal construction projects. We exploit the mortgage credit windfall as the shock that induced variation in housing prices to examine the effects of the latter on zoning corruption. The empirical analysis relies on objective measures of zoning corruption at the regional level from 2003 through 2008 for Greece and from 2006 through 2008 for Spain. We employ legal indictments of zoning officials from prosecution records for Greece, which are novel to the literature, and media reports of zoning corruption scandals for Spain. Adjusting for unemployment, population, population density and college attainment, our baseline negative binomial regression estimates indicate a positive and significant relationship between housing prices and zoning corruption. Our findings are robust to a series of checks that include zero-inflated variants of the negative binomial model, and linear models that address model misspecification, omitted variables and dynamic panel bias. In the case of Spain, we are also able to analyze the sensitivity of our findings using a provincial panel that provides substantially more cross-sectional variation.

Keywords: Housing Bubbles, Corruption, Zoning, Land Use, Greece, Spain, Euro

JEL Classification: H83, K42

Suggested Citation

Koumpias, Antonis and Martinez-Vazquez, Jorge and Sanz-Arcega, Eduardo, Housing Bubbles and Zoning Corruption: Evidence from Greece and Spain (November 8, 2015). Andrew Young School of Policy Studies Research Paper Series No. 15-11, Available at SSRN: https://ssrn.com/abstract=2702481 or http://dx.doi.org/10.2139/ssrn.2702481

Antonis Koumpias

Georgia State University - Andrew Young School of Policy Studies ( email )

Department of Economics
35 Broad Street, 6th Floor
Atlanta, GA 30303-3083
United States

HOME PAGE: http://https://sites.google.com/site/amkoumpias/

Jorge Martinez-Vazquez (Contact Author)

Georgia State University - Andrew Young School of Policy Studies ( email )

University Plaza
PO Box 3992
Atlanta, GA 30302-3992
United States
404-651-3990 (Phone)
404-651-3996 (Fax)

Eduardo Sanz-Arcega

University of Zaragoza - Faculty of Business and Economics ( email )

Gran Via, 2
50005 Zaragoza, Zaragoza 50005
Spain

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