Job Market Seminar by Andrii Parkhomenko (UAB)
Speaker: Andrii Parkhomenko (UAB)
Theme: "The Rise of Housing Supply Regulation in the U.S.: Local Causes and Aggregate Implications"
On Thursday, February 3 at 4.40 pm, International College of Economics and Finance and Faculty of Economic Sciences held the Job Market Seminar.Speaker: Andrii Parkhomenko (UAB)
Theme: "The Rise of Housing Supply Regulation in the U.S.: Local Causes and Aggregate Implications"
Abstract: Regulatory restrictions on housing supply have been rising in recent decades in the U.S. and have become a major determinant of house prices. What are the implications of the rise in regulation for aggregate productivity, and for wage and house price dispersion across metropolitan areas? To answer this question, I build a general equilibrium model with multiple locations, heterogeneous workers and endogenous regulation. Regulation is decided by voting: renters want less regulation and owners want more. In locations with faster exogenous productivity growth, labor supply and house prices also grow more rapidly. Homeowners in these places vote for stricter regulation, which raises prices further and leads to greater price dispersion. High-skilled workers, being less sensitive to housing costs, sort into productive places, which leads to larger wage dispersion. That is, wage and house price differences are amplified by regulation choices. To quantify this amplification effect, I calibrate the model to the U.S. economy and find that the rise in regulation accounts for 23% of the increase in wage dispersion and 85% of the increase in house price dispersion across metro areas from 1980 to 2007. I find that if regulation had not increased, more workers would live in productive areas and GDP would be 2% higher. I also show that policy interventions that weaken incentives of local governments to restrict supply could reduce wage and house price dispersion, and boost productivity by 1.5%.
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