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A Mediation Analysis of the Relationship Between Land Use Regulation Stringency and Employment Dynamics

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  • Uche Oluku
  • Shaoming Cheng

Abstract

The paper examines the effects of stringent land use regulations, measured using the Wharton Residential Land Use Regulatory Index (WRLURI), on employment growth during the period 2010-2020 in the Retail, Professional, and Information sectors across 878 local jurisdictions in the United States. All the local jurisdictions exist in both (2006 and 2018) waves of the WRLURI surveys and hence constitute a unique panel data. We apply a mediation analytical framework to decompose the direct and indirect effects of land use regulation stringency on sectoral employment growth and specialization. Our analysis suggests a fully mediated pattern in the relationship between excessive land use regulations and employment growth, with housing cost burden as the mediator. Specifically, a one standard deviation increase in the WRLURI index is associated with an approximate increase of 0.8 percentage point in the proportion of cost burdened renters. Relatedly, higher prevalence of cost-burdened renters has moderate adverse effects on employment growth in two sectors. A one percentage point increase in the proportion of cost burdened renters is associated with 0.04 and 0.017 percentage point decreases in the Professional and Information sectors, respectively.

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  • Uche Oluku & Shaoming Cheng, 2023. "A Mediation Analysis of the Relationship Between Land Use Regulation Stringency and Employment Dynamics," Papers 2305.02159, arXiv.org.
    • Handle: RePEc:arx:papers:2305.02159
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    References listed on IDEAS

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    1. Osei, Michael J. & Winters, John V., 2018. "Labor Demand Shocks and Housing Prices across the US: Does One Size Fit All?," IZA Discussion Papers 11636, Institute of Labor Economics (IZA).
    2. Saks, Raven E., 2008. "Job creation and housing construction: Constraints on metropolitan area employment growth," Journal of Urban Economics, Elsevier, vol. 64(1), pages 178-195, July.
    3. repec:cdl:bphupl:qt90m9g90w is not listed on IDEAS
    4. John Landis & Vincent J. Reina, 2021. "Do Restrictive Land Use Regulations Make Housing More Expensive Everywhere?," Economic Development Quarterly, , vol. 35(4), pages 305-324, November.
    5. Uche Oluku & Shaoming Cheng, 2021. "A Regional Analysis of the Relationship Between Housing Affordability and Business Growth," Economic Development Quarterly, , vol. 35(4), pages 269-286, November.
    6. John M. Quigley & Steven Raphael, 2005. "Regulation and the High Cost of Housing in California," American Economic Review, American Economic Association, vol. 95(2), pages 323-328, May.
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