Class 4: Institutions Flashcards
(14 cards)
Larsen & Kettel: What is a general paradox regarding housing supply?
With rising demand, why do cities not permit more housing?
Larsen & Kettel: What is the usual explanation for the lack of housing supply?
When the electorate is small, more citizens will live near any proposed housing development and face negative externalities, which they will then oppose because of NIMBYism. NIMBYist have a larger say in smaller electorates, thus politicians have a higher incentive to listen to them and block prospective housing initiatives
Larsen & Kettel: What theoretical argument do they suggest that goes against the prevailing wisdom regarding small electorates and housing supply?
Smaller local governments have a stronger incentive to permit more housing because their tax bases are more vulnerable to negative economic shocks. By permitting housing, they can attract new taxpayers and revenue, thereby reducing the negative shock’s impact
While politicians in smaller jurisdictions face relatively more NIMBY opposition, this is likely to be balanced out against their stronger incentive to promote housing development
Larsen & Kettel: Research methods, incl. IV and DV
Difference-in-difference design with Danish municipality reform in 2007 changing the jurisdiction sizes of some but not all municipalities
IV: Whether a municipality was consolidated in the 2007 reform
DV: Permitted and completed housing floor area per capita
Larsen & Kettel: What is their main finding?
Less housing is permitted and completed in areas where the local governments were consolidated
Larsen & Kettel: What is their findings predicated on?
The effect of the reform was concentrated in the areas where municipalities experienced large reductions in their tax base volatility (meaning less impact of negative shocks)
and in jurisdictions that become much geographically larger, limiting regional competition for taxpayers
Both risk to economic shocks and regional competition vary with jurisdiction size, explaining why smaller local governments have a stronger interest in building more housing
Larsen & Kettel: What do they conclude on their findings vs. the general consensus on jurisdiction size and housing supply?
Their different results might stem from a non-US perspective - in Denmark, local tax revenue is a much bigger portion of total revenue than in the US, thereby giving Danish politicians a larger incentive to attract new tax payers to increase revenue
Marantz & Lewis: What is their main finding regarding jurisdictional size and housing development?
The relationship between jurisdictional size and housing development is non-linear
Jurisdictions with 100,000-1 million residents are significantly more receptive to multifamily housing development than smaller or very large jurisdictions, esp. jurisdictions with populations of 500,000 to 1 mil
Marantz & Lewis: Research methods, incl. IV and DV
Regression analysis with census tracts as units in US
DV: Change in multifamily housing units 2008-2012 and 2014-2018
IV: Population size of the jurisdiction regulating the tract
Marantz & Lewis: Why are small jurisdictions less likely to allow multifamily housing?
They are more politically responsive to local homeowners who tend to oppose new developments due to fears about property values and racial/ethnic integration (NIMBYism). In smaller jurisdictions, a larger proportion of the population will feel the externalities
Marantz & Lewis: Why are larger jurisdictions (+100,000) more likely to allow multifamily housing?
- Homeowners are less likely to be the primary politically active constituency - for example, a large proportion of renters
- Businesses that benefit from larger labor and consumer pools may lobby for further housing development
- Larger jurisdictions may have better bureaucratic capability to plan and provide services
Marantz & Lewis: Why are very large jurisdictions (+1 mil) less likely to allow multifamily housing?
Quasi-monopoly theory: They face less competition from nearby areas (offering unique opportunities and proximity to employment), allowing powerful residents to extract economic rents or demand concessions from developers
Marantz & Lewis: Why do they use census tracts instead of jurisdiction-level analysis? (3)
- When the unit of analysis is the jurisdiction, there can be a nearly automatic relationship between population size and housing production, since more people require more housing
- Jurisdictions can be extremely heterogenous
- Using jurisdictions fails to account for the possibility of intra-jurisdictional variation
Marantz & Lewis: What are census tracts and why are they used?
Small, relatively permanent geographic areas in US which are similar in population size, making it easier to compare different places and capture variation within jurisdictions
