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Job creation and housing construction: constraints on metropolitan area employment growth

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  • Raven E. Saks

Abstract

Differences in the supply of housing generate substantial variation in housing prices across the United States. Because housing prices influence migration, the elasticity of housing supply also has an important impact on local labor markets. Specifically, an increase in labor demand will translate into less employment growth and higher wages in places where it is relatively difficult to build new houses. To identify metropolitan areas where the supply of housing is constrained, I assemble evidence on housing supply regulations from a variety of sources. In places with relatively few barriers to construction, an increase in housing demand leads to a large number of new housing units and only a moderate increase in housing prices. In contrast, for an equal demand shock, places with more regulation experience a 17 percent smaller expansion of the housing stock and almost double the increase in housing prices. Furthermore, I find that housing supply regulations have a significant effect on local labor market dynamics. Whereas a 1 percent increase in labor demand generally leads to a 1 percent increase in the long-run level of employment, the employment response is less than 0.8 percent in places where the housing supply is highly constrained.

Suggested Citation

  • Raven E. Saks, 2005. "Job creation and housing construction: constraints on metropolitan area employment growth," Finance and Economics Discussion Series 2005-49, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2005-49
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Midnight Cowboys? New York City Housing Prices and Population Growth in the 21st Century
      by Jason Barr in Skynomics Blog on 2018-11-07 12:33:28
    2. Revisiting 1916 (Part III): New York’s First Zoning Resolution and the Roots of NIMBYism
      by Jason Barr in Skynomics Blog on 2019-04-30 12:42:15

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    Cited by:

    1. 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.
    2. Kory Kroft & Devin G. Pope, 2014. "Does Online Search Crowd Out Traditional Search and Improve Matching Efficiency? Evidence from Craigslist," Journal of Labor Economics, University of Chicago Press, vol. 32(2), pages 259-303.
    3. Somik V. Lall & Hyoung Gun Wang & Daniel Da Mata, 2007. "Do Urban Land Regulations Influence Slum Formation? Evidence From Brazilian Cities," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 119, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    Keywords

    Job creation; Housing; Employment forecasting;
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