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Owners of Developed Land versus Owners of Undeveloped Land: Why Land Use is More Constrained in the Bay Area than in Pittsburgh

  • Christian Hilber
  • Frédéric Robert-Nicoud

We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints are interpreted as shadow taxes that increase the land rent of already developed plots and reduce the amount of new housing developments. In general equilibrium, locations with nicer amenities are more developed and, as a consequence, more regulated. We test our model predictions by geographically matching amenity, land use, and historical Census data to metropolitan area level survey data on regulatory restrictiveness. Following the predictions of the model, we use amenities as instrumental variables and demonstrate that metropolitan areas with better amenities are more developed and more tightly regulated than other areas. Consistent with theory, metropolitan areas that are more regulated also grow more slowly.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0760.

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Date of creation: Nov 2006
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Handle: RePEc:cep:cepdps:dp0760
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Brueckner, Jan K. & Joo, Man-Soo, 1991. "Voting with capitalization," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 453-467, November.
  2. William A. Fischel, 1990. "Introduction: Four Maxims for Research on Land-Use Controls," Land Economics, University of Wisconsin Press, vol. 66(3), pages 229-236.
  3. Christian A. L. Hilber, 2007. "New housing supply and the dilution of social capital," LSE Research Online Documents on Economics 3573, London School of Economics and Political Science, LSE Library.
  4. Paul Cheshire & Christian A.L. Hilber, 2007. "Office space supply restrictions in Britain: the political economy of market revenge," LSE Research Online Documents on Economics 3203, London School of Economics and Political Science, LSE Library.
  5. Christian A.L. Hilber, 2003. "Neighborhood externality risk and the homeownership status of properties," Proceedings 885, Federal Reserve Bank of Chicago.
  6. J. Michael Pogodzinski & Tim R. Sass, 1990. "The Economic Theory of Zoning: A Critical Review," Land Economics, University of Wisconsin Press, vol. 66(3), pages 294-314.
  7. Brueckner, Jan K., 1995. "Strategic control of growth in a system of cities," Journal of Public Economics, Elsevier, vol. 57(3), pages 393-416, July.
  8. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2006. "Superstar Cities," NBER Working Papers 12355, National Bureau of Economic Research, Inc.
  9. David E. Mills, 1989. "Is Zoning a Negative-Sum Game?," Land Economics, University of Wisconsin Press, vol. 65(1), pages 1-12.
  10. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
  11. Edward L. Glaeser & Joseph Gyourko & Raven Saks, 2003. "Why is Manhattan So Expensive? Regulation and the Rise in House Prices," NBER Working Papers 10124, National Bureau of Economic Research, Inc.
  12. Brueckner, Jan K. & Lai, Fu-Chuan, 1996. "Urban growth controls with resident landowners," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 125-143, April.
  13. Marcy Burchfield & Henry G. Overman & Diego Puga & Matthew A. Turner, 2005. "Causes of sprawl: A portrait from space," Working Papers tecipa-192, University of Toronto, Department of Economics.
  14. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  15. Helsley, Robert W. & Strange, William C., 1995. "Strategic growth controls," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 435-460, August.
  16. Linneman, Peter, 1985. "An economic analysis of the homeownership decision," Journal of Urban Economics, Elsevier, vol. 17(2), pages 230-246, March.
  17. Fischel, William A, 1992. "Property Taxation and the Tiebout Model: Evidence for the Benefit View from Zoning and Voting," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 171-77, March.
  18. Christian A. L. Hilber & Christopher J. Mayer, 2004. "Why Do Households Without Children Support Local Public Schools?," NBER Working Papers 10804, National Bureau of Economic Research, Inc.
  19. Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Scholarly Articles 3450061, Harvard University Department of Economics.
  20. Murata, Yasusada, 2003. "Product diversity, taste heterogeneity, and geographic distribution of economic activities:: market vs. non-market interactions," Journal of Urban Economics, Elsevier, vol. 53(1), pages 126-144, January.
  21. Brueckner, Jan K., 1998. "Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls," Journal of Urban Economics, Elsevier, vol. 44(3), pages 438-467, November.
  22. Oded Palmon & Baron A. Smith, 1998. "New Evidence on Property Tax Capitalization," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1099-1128, October.
  23. Fischel, William A., 2001. "Homevoters, Municipal Corporate Governance, and the Benefit View of the Property Tax," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 157-74, March.
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