Tarnishing the golden and empire states

Land-use restrictions and the U.S. economic slowdown

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

Research output: Contribution to journalArticle

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)
JournalJournal of Monetary Economics
DOIs
StateAccepted/In press - Jan 1 2017

Fingerprint

Land use
Economics
Economic activity
General equilibrium
Data sources
Spatial model
Experiment
Workers
Macroeconomics
Productivity
Reallocation

Keywords

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

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Tarnishing the golden and empire states : Land-use restrictions and the U.S. economic slowdown. / Herkenhoff, Kyle F.; Ohanian, Lee E.; Prescott, Edward.

In: Journal of Monetary Economics, 01.01.2017.

Research output: Contribution to journalArticle

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