Housing Constraints and Spatial Misallocation

Chang-Tai Hsieh, Enrico Moretti

NBER Working Paper No. 21154
Issued in May 2015, Revised in May 2017
NBER Program(s):Economic Fluctuations and Growth, Labor Studies, Public Economics, Productivity, Innovation, and Entrepreneurship

We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w21154

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