IDEAS home Printed from https://ideas.repec.org/a/wly/quante/v13y2022i1p179-223.html
   My bibliography  Save this article

The environmental cost of land‐use restrictions

Author

Listed:
  • Mark Colas
  • John M. Morehouse

Abstract

Cities with cleaner power plants and lower energy demand tend also to have tighter land‐use restrictions; these restrictions increase housing prices and reduce the incentive for households to live in these lower greenhouse gas‐emitting cities. We use a spatial equilibrium model to quantify the overall effects of land‐use restrictions on the levels and spatial distribution of household carbon emissions. Our model features heterogeneous households, cities that vary in both their power plant technologies and their utility benefits of energy usage, as well as endogenous wages and rents. Relaxation of the current land‐use restrictions in California to the level faced by the median urban household in the US leads to a 0.6% drop in national household carbon emissions and a decrease in the social cost of carbon of $310 million annually.

Suggested Citation

  • Mark Colas & John M. Morehouse, 2022. "The environmental cost of land‐use restrictions," Quantitative Economics, Econometric Society, vol. 13(1), pages 179-223, January.
    • Handle: RePEc:wly:quante:v:13:y:2022:i:1:p:179-223
    DOI: 10.3982/QE1544
    as

    Download full text from publisher

    File URL: https://doi.org/10.3982/QE1544
    Download Restriction: no
    File URL: https://libkey.io/10.3982/QE1544?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Patrick Kline & Enrico Moretti, 2014. "People, Places, and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 629-662, August.
    2. Juan Carlos Suárez Serrato & Owen Zidar, 2016. "Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 106(9), pages 2582-2624, September.
    3. Lucija Muehlenbachs & Elisheba Spiller & Christopher Timmins, 2015. "The Housing Market Impacts of Shale Gas Development," American Economic Review, American Economic Association, vol. 105(12), pages 3633-3659, December.
    4. Glaeser, Edward L. & Kahn, Matthew E., 2010. "The greenness of cities: Carbon dioxide emissions and urban development," Journal of Urban Economics, Elsevier, vol. 67(3), pages 404-418, May.
    5. Chang-Tai Hsieh & Enrico Moretti, 2019. "Housing Constraints and Spatial Misallocation," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(2), pages 1-39, April.
    6. Nathaniel Baum-Snow & Ronni Pavan, 2013. "Inequality and City Size," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1535-1548, December.
    7. Gaigné, Carl & Riou, Stéphane & Thisse, Jacques-François, 2012. "Are compact cities environmentally friendly?," Journal of Urban Economics, Elsevier, vol. 72(2), pages 123-136.
    8. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1253-1296.
    9. Rebecca Diamond, 2016. "The Determinants and Welfare Implications of US Workers' Diverging Location Choices by Skill: 1980-2000," American Economic Review, American Economic Association, vol. 106(3), pages 479-524, March.
    10. Herkenhoff, Kyle F. & Ohanian, Lee E. & Prescott, Edward C., 2018. "Tarnishing the golden and empire states: Land-use restrictions and the U.S. economic slowdown," Journal of Monetary Economics, Elsevier, vol. 93(C), pages 89-109.
    11. Dahl, Carol & Duggan, Thomas E., 1996. "U.S. energy product supply elasticities: A survey and application to the U.S. oil market," Resource and Energy Economics, Elsevier, vol. 18(3), pages 243-263, October.
    12. Muller, Nicholas Z. & Mendelsohn, Robert, 2007. "Measuring the damages of air pollution in the United States," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 1-14, July.
    13. Albouy, David & Ehrlich, Gabriel, 2018. "Housing productivity and the social cost of land-use restrictions," Journal of Urban Economics, Elsevier, vol. 107(C), pages 101-120.
    14. Michail Fragkias & José Lobo & Deborah Strumsky & Karen C Seto, 2013. "Does Size Matter? Scaling of CO2 Emissions and U.S. Urban Areas," PLOS ONE, Public Library of Science, vol. 8(6), pages 1-8, June.
    15. Joseph Aldy & Matthew J. Kotchen & Mary Evans & Meredith Fowlie & Arik Levinson & Karen Palmer, 2021. "Cobenefits and Regulatory Impact Analysis: Theory and Evidence from Federal Air Quality Regulations," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 2(1), pages 117-156.
    16. Stephen P. Holland & Erin T. Mansur, 2008. "Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 550-561, August.
    17. Steven Berry & James Levinsohn & Ariel Pakes, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 68-105, February.
    18. Larson, William & Yezer, Anthony, 2015. "The energy implications of city size and density," Journal of Urban Economics, Elsevier, vol. 90(C), pages 35-49.
    19. David Albouy & Bryan A. Stuart, 2020. "Urban Population And Amenities: The Neoclassical Model Of Location," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 127-158, February.
    20. Stephen P. Holland & Erin T. Mansur & Nicholas Z. Muller & Andrew J. Yates, 2016. "Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors," American Economic Review, American Economic Association, vol. 106(12), pages 3700-3729, December.
    21. Kenneth Y. Chay & Michael Greenstone, 2003. "The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 1121-1167.
    22. Borck, Rainald, 2016. "Will skyscrapers save the planet? Building height limits and urban greenhouse gas emissions," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 13-25.
    23. Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.
    24. Danae Hernandez-Cortes & Kyle C. Meng, 2020. "Do Environmental Markets Cause Environmental Injustice? Evidence from California's Carbon Market," NBER Working Papers 27205, National Bureau of Economic Research, Inc.
    25. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
    26. Gaigné, Carl & Riou, Stéphane & Thisse, Jacques-François, 2012. "Are compact cities environmentally friendly?," Journal of Urban Economics, Elsevier, vol. 72(2), pages 123-136.
    27. Matthew J. Notowidigdo, 2020. "The Incidence of Local Labor Demand Shocks," Journal of Labor Economics, University of Chicago Press, vol. 38(3), pages 687-725.
    28. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 331-369, October.
    29. Janet Currie & Lucas Davis & Michael Greenstone & Reed Walker, 2015. "Environmental Health Risks and Housing Values: Evidence from 1,600 Toxic Plant Openings and Closings," American Economic Review, American Economic Association, vol. 105(2), pages 678-709, February.
    30. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-318, May.
    31. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    32. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    33. Dionysia Lambiri & Bianca Biagi & Vicente Royuela, 2007. "Quality of Life in the Economic and Urban Economic Literature," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 84(1), pages 1-25, October.
    34. Kahn Matthew E., 1995. "A Revealed Preference Approach to Ranking City Quality of Life," Journal of Urban Economics, Elsevier, vol. 38(2), pages 221-235, September.
    35. Stephen P. Holland & Erin T. Mansur & Nicholas Z. Muller & Andrew J. Yates, 2019. "Distributional Effects of Air Pollution from Electric Vehicle Adoption," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 65-94.
    36. Suphanit Piyapromdee, 2021. "The Impact of Immigration on Wages, Internal Migration, and Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 406-453.
    37. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
    38. Mark Colas & Kevin Hutchinson, 2021. "Heterogeneous Workers and Federal Income Taxes in a Spatial Equilibrium," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 100-134, May.
    39. John M. Quigley & Steven Raphael, 2005. "Regulation and the High Cost of Housing in California," American Economic Review, American Economic Association, vol. 95(2), pages 323-328, May.
    40. Joseph Gyourko & Albert Saiz & Anita Summers, 2008. "A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index," Urban Studies, Urban Studies Journal Limited, vol. 45(3), pages 693-729, March.
    41. Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," Econometrica, Econometric Society, vol. 70(6), pages 2367-2420, November.
    42. Carl Gaigné & Stéphane Riou & Jacques-François Thisse, 2012. "Are Compact Cities Environmentally (and Socially) Desirable ?," Cahiers de recherche CREATE 2012-4, CREATE.
    43. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
    44. Bound, John & Holzer, Harry J, 2000. "Demand Shifts, Population Adjustments, and Labor Market Outcomes during the 1980s," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 20-54, January.
    45. Qin Fan & Karen Fisher-Vanden & H. Allen Klaiber, 2018. "Climate Change, Migration, and Regional Economic Impacts in the United States," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(3), pages 643-671.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Borck, Rainald & Mulder, Peter, 2024. "Energy policies and pollution in two developing country cities: A quantitative model," Journal of Development Economics, Elsevier, vol. 171(C).
    2. Rainald Borck & Peter Mulder, 2024. "Energy policies and pollution in two developing country cities: A quantitative model," CEPA Discussion Papers 78, Center for Economic Policy Analysis.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kahn, Matthew E. & Walsh, Randall, 2015. "Cities and the Environment," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 405-465, Elsevier.
    2. Mark Colas & John M. Morehouse, 2019. "The Environmental Cost of Land Use Restrictions," Opportunity and Inclusive Growth Institute Working Papers 20, Federal Reserve Bank of Minneapolis.
    3. Ning Jia & Raven Molloy & Christopher Smith & Abigail Wozniak, 2023. "The Economics of Internal Migration: Advances and Policy Questions," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 144-180, March.
    4. Cun, Wukuang & Pesaran, M. Hashem, 2022. "A spatiotemporal equilibrium model of migration and housing interlinkages," Journal of Housing Economics, Elsevier, vol. 57(C).
    5. Howard, Greg & Liebersohn, Jack, 2021. "Why is the rent so darn high? The role of growing demand to live in housing-supply-inelastic cities," Journal of Urban Economics, Elsevier, vol. 124(C).
    6. Farid Farrokhi, 2021. "Skill, Agglomeration, And Inequality In The Spatial Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(2), pages 671-721, May.
    7. Larson, William & Yezer, Anthony & Zhao, Weihua, 2022. "Urban planning policies and the cost of living in large cities," Regional Science and Urban Economics, Elsevier, vol. 96(C).
    8. Rainald Borck & Takatoshi Tabuchi, 2019. "Pollution and city size: can cities be too small?," Journal of Economic Geography, Oxford University Press, vol. 19(5), pages 995-1020.
    9. Laurel Wheeler, 2019. "Property Rights, Place-Based Policies, and Economic Development," Working Papers 19-16, Center for Economic Studies, U.S. Census Bureau.
    10. Nathaniel Harris & Chuanhao Lin, 2024. "Planning Regulations: Two Tests to Determine if We Have Confused the Cure With the Disease," Working Papers 2024-02, The George Washington University, Institute for International Economic Policy.
    11. Carozzi, Felipe & Roth, Sefi, 2020. "Dirty Density: Air Quality and the Density of American Cities," IZA Discussion Papers 13191, Institute of Labor Economics (IZA).
    12. Pflüger, Michael, 2021. "City size, pollution and emission policies," Journal of Urban Economics, Elsevier, vol. 126(C).
    13. Michael Pflüger, 2020. "City Size, Pollution and Emission Policies," CESifo Working Paper Series 8448, CESifo.
    14. Alves, Guillermo, 2021. "Slum growth in Brazilian cities," Journal of Urban Economics, Elsevier, vol. 122(C).
    15. Parkhomenko, Andrii, 2023. "Local causes and aggregate implications of land use regulation," Journal of Urban Economics, Elsevier, vol. 138(C).
    16. Colas, Mark & Saulnier, Emmett, 2023. "Vertical migration externalities," Regional Science and Urban Economics, Elsevier, vol. 101(C).
    17. Carozzi, Felipe & Roth, Sefi, 2023. "Dirty density: Air quality and the density of American cities," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    18. Bieri, David S. & Kuminoff, Nicolai V. & Pope, Jaren C., 2023. "National expenditures on local amenities," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    19. Castells-Quintana, David & Dienesch, Elisa & Krause, Melanie, 2021. "Air pollution in an urban world: A global view on density, cities and emissions," Ecological Economics, Elsevier, vol. 189(C).
    20. Denant-Boemont, Laurent & Gaigné, Carl & Gaté, Romain, 2018. "Urban spatial structure, transport-related emissions and welfare," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 29-45.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:quante:v:13:y:2022:i:1:p:179-223. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.