Tarnishing the Golden and Empire States: Land-Use Restrictions and the U.S. Economic Slowdown

62 Pages Posted: 11 Sep 2017

See all articles by Kyle Herkenhoff

Kyle Herkenhoff

University of Minnesota - Minneapolis

Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Edward C. Prescott

Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER)

Date Written: September 2017

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.

Suggested Citation

Herkenhoff, Kyle and Ohanian, Lee E. and Prescott, Edward C., Tarnishing the Golden and Empire States: Land-Use Restrictions and the U.S. Economic Slowdown (September 2017). NBER Working Paper No. w23790, Available at SSRN: https://ssrn.com/abstract=3035138

Kyle Herkenhoff (Contact Author)

University of Minnesota - Minneapolis ( email )

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Lee E. Ohanian

University of California, Los Angeles (UCLA) - Department of Economics ( email )

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Los Angeles, CA 90095-1477
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National Bureau of Economic Research (NBER)

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Edward C. Prescott

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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