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CEP discussion paper
Owners of Developed Land versus Owners of Undeveloped Land: Why Land Use is More Constrained in the Bay Area than in Pittsburgh
Christian A. L. Hilber and Frédéric Robert-Nicoud November 2006
Paper No' CEPDP0760:
Full Paper (pdf)

JEL Classification: H7; Q15; R52

Tags: land use regulations; zoning; land ownership; housing supply

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.