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Housing Productivity and the Social Cost of Land-Use Restrictions

  • David Albouy
  • Gabriel Ehrlich

We use metro-level variation in both land and non-land input prices to test and estimate a housing production function and differences in local factor productivity. The econometric model implies that the typical cost share of land is one-third, and substitution with non-land inputs is inelastic. More stringent geographic and regulatory constraints increase housing prices relative to input costs. Disaggregated analysis finds state-level constraints are costliest, and provide a Regulatory Cost Index (RCI) independent of demand factors. Housing productivity falls with city population. The costs of land-use regulations outweigh associated quality-of-life benefits.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18110.

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Date of creation: May 2012
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Handle: RePEc:nbr:nberwo:18110
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