The Spatial Consequences of Autarky in Land-Use Regulation: Strategic Interaction or Parallelism?

In most of the United States, land-use regulations are determined independently by the cities and towns within a metropolitan housing market. Despite theoretical analysis of the interaction among regulatory decisions across jurisdictions, empirical evidence is limited. In this paper, we explore the spatial distribution of specific categories of land-use regulations based upon original data collected for the San Francisco Bay Area. We document the strong positive autocorrelation which characterizes regulations enacted independently by local governments in nearby cities. This spatial autocorrelation is somewhat weaker, but still significant, when the demographic determinants of land-use regulations are controlled for in autoregressive models. Similar results have previously been interpreted as evidence of strategic interaction among local governments. However, it is also true that the demographic characteristics of neighboring cities are highly correlated. When both of these factors are recognized in appropriate statistical models, we find no evidence of a spatial relationship among land-use rules. This casts doubt on the importance of strategic interaction in the enactment of land-use regulations.