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 benefit the former group (via increasing property prices) but hurt the latter (via increasing development costs). More desirable locations are more developed and, as a consequence of political economy forces, more regulated. Using an IV approach that directly follows from our model we find strong and robust support for our predictions. The data provide weak or no support for alternative hypotheses whereby regulations reflect the wishes of the majority of households or efficiency motives.

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Christian A. L. Hilber and Frédéric Robert-Nicoud

December 2009     Paper Number CEPDP0964

Download PDF - On the Origins of Land Use Regulations: Theory and Evidence from US Metro Areas

This CEP discussion paper is published under the centre's Trade programme.