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The Environmental Cost of Land Use Restrictions

Author

Listed:
  • Mark Colas
  • John M. Morehouse

Abstract

Cities with cleaner power plants and lower energy demand have stricter land use restrictions; these restrictions increase housing prices and disincentivize living in these lower polluting cities. We use a spatial equilibrium model to quantify the effect of land use restrictions on household carbon emissions. Our model features heterogeneous households, cities that vary by power plant technology and the benefits of energy usage, as well as endogenous wages and rents. Relaxing restrictions in California to the national median leads to a 2.3% drop in national carbon emissions. The burden of a carbon tax differs substantially across locations.

Suggested Citation

  • Mark Colas & John M. Morehouse, 2019. "The Environmental Cost of Land Use Restrictions," Working Papers 20, Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute.
  • Handle: RePEc:fip:fedmoi:0020
    DOI: 10.21034/iwp.20
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    File URL: https://www.minneapolisfed.org/institute/working-papers-institute/iwp20.pdf
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    References listed on IDEAS

    as
    1. Dahl, Carol & Duggan, Thomas E., 1996. "U.S. energy product supply elasticities: A survey and application to the U.S. oil market," Resource and Energy Economics, Elsevier, vol. 18(3), pages 243-263, October.
    2. Albouy, David & Ehrlich, Gabriel, 2018. "Housing productivity and the social cost of land-use restrictions," Journal of Urban Economics, Elsevier, vol. 107(C), pages 101-120.
    3. Suphanit Piyapromdee, 2017. "The Impact of Immigration on Wages, Internal Migration and Welfare," PIER Discussion Papers 69, Puey Ungphakorn Institute for Economic Research, revised Sep 2017.
    4. Patrick Kline & Enrico Moretti, 2014. "People, Places, and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 629-662, August.
    5. David Albouy & Bryan Stuart, 2014. "Urban Population and Amenities: The Neoclassical Model of Location," NBER Working Papers 19919, National Bureau of Economic Research, Inc.
    6. Joseph Gyourko & Albert Saiz & Anita Summers, 2008. "A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index," Urban Studies, Urban Studies Journal Limited, vol. 45(3), pages 693-729, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Greenhouse gasses; Local labor markets; Spatial equilibrium;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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