Exclusionary Zoning is Even Worse than Previously Thought
Economists and land-use scholars across the political spectrum have long known that restrictive zoning cuts off millions of people from housing and job opportunities. It is one of the biggest obstacles to increasing economic growth and promoting opportunity for the poor and disadvantaged. But new evidence suggests that the problem is even worse than previously thought.
The work of economists Chang-Tai Hsieh and Enrico Moretti is perhaps the most influential in the literature documenting the impact of zoning on economic growth. Recently, my George Mason University colleague, economist Bryan Caplan, discovered some significant calculation errors in their pathbreaking 2019 article “Housing Constraints and Spatial Misallocation.” Hsieh and Moretti have graciously acknowledged the mistake.
When scholars err, the effect is often to make their arguments seem stronger or better-supported than is actually the case. In this instance, however, Hsieh and Moretti’s mistake actually made the harmful effects of zoning seem much smaller than is actually the case. Bryan explains:
Where did HM go wrong? On pp.25-6 of their article, they write:
Starting with perfect mobility, the second row in Table 4 shows the effect of changing the housing supply regulation only in New York, San Jose, and San Francisco to that in the median US city. This would increase the growth rate of aggregate output from 0.795 percent to 1.49 percent per year—an 87 percent increase (column 1). The net effect is that US GDP in 2009 would be 8.9 percent higher under this counterfactual, which translates into an additional $8,775 in average wages for all workers.
On the next page, they re-estimate the results with imperfect mobility:
Table 5 shows that changing the housing supply regulation in New York, San Jose, and San Francisco to that in the median US city would increase the growth rate of aggregate output by 36.3 percent (
Article from Latest – Reason.com