Urban Elite Capture and US Growth

Hsieh and Moretti have a new working paper identifying how land market rigidities and NIMBYist rent seeking (in both housing and labor markets...) have retarded growth:
The increase in spatial wage dispersion is driven at least in part by cities like New York, San Francisco and San Jose, which experienced some of the strongest growth in labor productivity over the last five decades (Moretti (2012)). These cities also adopted land use restrictions that significantly constrained the amount of new housing that can be built. As described by Glaeser (2014), since the 1960s coastal U.S. cities have gone through a property rights revolution which has significantly reduced the elasticity of housing supply: “In the 1960s, developers found it easy to do business in much of the country. In the past 25 years, construction has come to face enormous challenges from any local opposition. In some areas it feels as if every neighbor has veto rights over every project.” 
Misallocation arises because the constraints on housing supply in the most productive US cities effectively limit the number of workers who have access to such high productivity. Instead of increasing local employment, productivity growth in housing-constrained cities primarily pushes up housing prices and nominal wages. The resulting misallocation of workers lowers aggregate output and welfare of workers in all US cities. 
We use data from 220 metropolitan areas in the US from 1964 to 2009 to perform two calculations. First, we quantify the effect of spatial misallocation. We find that most of the increased spatial dispersion in the marginal product of labor is due to the growing spatial dispersion in housing prices. In turn, the growing spatial dispersion of housing prices is largely driven by strict zoning laws in cities such as New York and the San Francisco Bay Area with strong productivity growth. We find that the increased spatial misallocation of labor due to housing supply constraints in cities with high productivity growth rates lowered aggregate growth by almost 50% between 1964 and 2009.
One of my favorite ways of summarizing what it's like to live in the Bay is that LinkedIn says there are 127,000 open jobs and Zillow says there 11,000 open units.

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