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Housing Supply Elasticity and Rent Extraction by State and Local Governments

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  • Diamond, Rebecca

    (Stanford University)

Abstract

Governments may extract rent from private citizens by inflating taxes and spending on projects which benefit special interests. Using a spatial equilibrium model, I show that less elastic housing supplies increase governments' abilities to extract rents. Inelastic housing supply elasticity, driven by exogenous variation in local topography, raises local governments' tax revenue. I find that public sector workers, one of the largest government special interests, capture a share of these rents either through increased compensation when formal collective bargaining is legal or by increased corruption when collective bargaining is outlawed.

Suggested Citation

  • Diamond, Rebecca, 2015. "Housing Supply Elasticity and Rent Extraction by State and Local Governments," Research Papers 3330, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:3330
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    Cited by:

    1. Brian Asquith & Evan Mast & Davin Reed, 2019. "Supply Shock Versus Demand Shock: The Local Effects of New Housing in Low-Income Areas," Upjohn Working Papers and Journal Articles 19-316, W.E. Upjohn Institute for Employment Research.
    2. J. Vernon Henderson & Matthew A. Turner, 2020. "Urbanization in the Developing World: Too Early or Too Slow?," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 150-173, Summer.
    3. Ruben Enikolopov, 2011. "Are Bureaucrats Really Paid Like Bureaucrats?," Working Papers w0165, Center for Economic and Financial Research (CEFIR).
    4. Chang-Tai Hsieh & Enrico Moretti, 2019. "Housing Constraints and Spatial Misallocation," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(2), pages 1-39, April.
    5. Wenquan Liang & Ran Song & Christopher Timmins, 2020. "Frictional Sorting," NBER Working Papers 27643, National Bureau of Economic Research, Inc.
    6. Yashar Blouri, Simon Büchler, Olivier Schöni, 2019. "The Geography of Housing Subsidies," Diskussionsschriften credresearchpaper25, Universitaet Bern, Departement Volkswirtschaft - CRED.
    7. Stephan Geschwind & Felix Roesel, 2021. "Taxation under Direct Democracy," CESifo Working Paper Series 9166, CESifo.
    8. Brülhart, Marius & Danton, Jayson & Parchet, Raphaël & Schläpfer, Jörg, 2021. "Who Bears the Burden of Local Taxes?," CEPR Discussion Papers 15826, C.E.P.R. Discussion Papers.
    9. Wataru Takahashi, "undated". "Population Mobility Structural Analysis and Population Estimation Using a Quantitative Spatial Model," Discussion papers ron339, Policy Research Institute, Ministry of Finance Japan.
    10. Sant'Anna, Marcelo Castello Branco & Iachan, Felipe Saraiva & Guedes, Ricardo Brito, 2021. "Housing supply in the presence of Iiformality," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 823, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    11. Matthew Davis & Fernando V. Ferreira, 2017. "Housing Disease and Public School Finances," NBER Working Papers 24140, National Bureau of Economic Research, Inc.
    12. Tianzheng Zhang & Yingxiang Zeng & Yingjie Zhang & Yan Song & Hongxun Li, 2020. "The Heterogenous Demand for Urban Parks between Home Buyers and Renters: Evidence from Beijing," Sustainability, MDPI, Open Access Journal, vol. 12(21), pages 1-16, October.
    13. David S. Bieri & Casey J. Dawkins, 2019. "Amenities, affordability, and housing vouchers," Journal of Regional Science, Wiley Blackwell, vol. 59(1), pages 56-82, January.
    14. Tianzheng Zhang & Yingxiang Zeng & Yingjie Zhang & Yan Song & Hongxun Li, 2020. "Dynamic and Heterogeneous Demand for Urban Green Space by Urban Residents: Evidence from the Cities in China," Sustainability, MDPI, Open Access Journal, vol. 12(22), pages 1-15, November.
    15. Simon Büchler, Maximilian v. Ehrlich, Olivier Schöni, 2019. "The Amplifying Effect of Capitalization Rates on Housing Supply," Diskussionsschriften credresearchpaper24, Universitaet Bern, Departement Volkswirtschaft - CRED.

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    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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