You may notice that I’m phoning it in a little a posting a ton of stories from other sources, well, it’s summer and people tend to go on vacations at disparate times so I’m taking advantage of the lull and posting pieces that I have been saving up for a while now. Next up, how NIMBYism affects the economy. From City Lab:
The researchers show that increased “wage dispersion” from 1964 to 2009 has held back U.S. GDP growth by a whopping 13.5 percent of what it could be.
“This amounts to an annual wage increase of $8,775 for the average worker,” the paper reads.
Hsieh and Moretti came up with a way to measure what local output and national growth would look like if wage dispersion were equalized. They proposed a model that lowered the regulatory housing constraints in New York, San Francisco, and San Jose to the level of a median city. If workers were able to cross over from low-wage cities to high-wage cities—that is, if New York, San Francisco, and San Jose were to lower barriers to new housing and let them in—then GDP could rise by 9.5 percent.
Now you might be thinking, but Lauren, all we need are jobs, not houses, to boost the economy. Well, those researchers tell you that your gut feeling about that is incorrect.
From the actual research paper itself:
Although labor productivity and labor demand grew most rapidly in New York, San Francisco, and San Jose thanks to a concentration of human capital intensive industries like high tech and finance, growth in these three cities had limited benefits for the U.S. as a whole. The reason is that the main effect of the fast productivity growth in New York, San Francisco, and San Jose was an increase in local housing prices and local wages, not in employment.
Constraints to housing supply reflect both land availability and deliberate land use regulations. We estimate that holding constant land availability, but lowering regulatory constraints in New York, San Francisco, and San Jose cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%. Our results thus suggest that local land use regulations that restrict housing supply in dynamic labor markets have important externalities on the rest of the country. Incumbent homeowners in high wage cities have a private incentive to restrict housing supply. By doing so, these voters de facto limit the number of US workers who have access to the most productive of American cities.
For example, Silicon Valley—the area between San Francisco and San Jose—has some of the most productive labor in the globe. But, as Glaeser (2014) puts it, “by global urban standards, the area is remarkably low density” due to land use restrictions. In a region with some of the most expensive real estate in the world, surface parking lots, 1-story buildings and underutilized pieces of land are still remarkably common due to land use restrictions. While the region’s natural amenities—its hills, beaches and parks—are part of the attractiveness of the area, there is enough underutilized land within its urban core that housing units could be greatly expanded without any reduction in natural amenities. Our findings indicate that in general equilibrium, this would raise income and welfare of all US workers.
The two solutions proffered by the researchers? Build housing (by allowing the federal government to step in and set land use regulations) or make transit links better and cheaper (high speed trains to bring cheaper housing “closer” via transit).