DP12912 Housing Constraints and Spatial Misallocation
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 36% from 1964 to 2009.