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We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints benefit the former group (via increasing property prices) but hurt the latter (via increasing development costs). More desirable locations are more developed and, as a consequence of political economy forces, more regulated. Using an IV approach that directly follows from our model we find strong and robust support for our predictions. The data provide weak or no support for alternative hypotheses whereby regulations reflect the wishes of the majority of households or efficiency motives.

While residents receive similar benefits from many local public expenditures, only about one-third of all households have children in the public schools. In this paper we argue that capitalization of school spending into house prices can encourage residents to support spending on schools, even if the residents themselves will never have children in the schools. To examine this hypothesis, we take advantage of differences across communities in the extent of house price capitalization based on the availability of land or population density. We show that fiscal variables and amenities are capitalized to a much greater extent in Massachusetts cities and towns with little available land and that these localities also spend more on schools. Next, we use data from school districts in 49 states to show that per pupil spending is positively related to population density, a proxy for the availability of land. Consistent with a model tying house price capitalization to school spending, we show that the positive correlation between density and spending persists only in locations with high homeownership rates. Communities with a higher percentage of residents above 65 years old have increased school expenditures only in places with high population densities, and this correlation grows for the percentage of elderly above 75 or 85 years old who have a shorter expected duration in their house. The positive relationship between percentage elderly and school spending is confined to central cities and suburbs of large metropolitan areas and does not exist in places where land for new construction may be easier to obtain. These results support models in which house price capitalization encourages more efficient provision of public services and provide an explanation for why some elderly residents might support local spending on schools. According to the 1990 U.S. Census, 36 percent of all households have children below 18 years. Furthermore, the National Household Education Survey (NHES) of the U. S. Department of Education documents that for 1993, 91.2 percent of students in grades 3-12 are enrolled in public schools, while 8.8 percent of the students are enrolled in private schools.

This paper examines the impact of the combined U.S. state and federal mortgage interest deduction (MID) on homeownership attainment, using data from 1984 to 2007 and exploiting variation in the subsidy arising from changes in the MID within and across states over time. We test whether capitalization of the MID into house prices offsets the positive effect on homeownership. We find that the MID boosts homeownership attainment only of higher income households in less tightly regulated housing markets. In more restrictive places an adverse effect exists. The MID is an ineffective policy to promote homeownership and improve social welfare.JEL classification: H22, H24, H71, R21, R31, R52

We test the theoretical prediction that house prices respond more strongly to changes in local earnings in places with tight supply constraints using a unique panel dataset of 353 Local Planning Authorities in England between 1974 and 2008. Exploiting exogenous variation from a policy reform, vote shares and historical density to identify the endogenous constraints‐measures, we find that: regulatory constraints have a substantive positive impact on the house price‐earnings elasticity; the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas; and uneven topography has a quantitatively less meaningful impact.

Abstract

Hilber C. A. L. and Voicu I. Agglomeration economies and the location of foreign direct investment: empirical evidence from Romania, Regional Studies. The large inflow of foreign direct investment into Romania, after the revolution in 1989, is exploited to study the determinants of foreign direct investment location in transition economies. Using a conditional logit set-up and choice-specific fixed-effects, it is found that external economies from service agglomeration are the main determinant of foreign direct investment location. An increase in service employment density by 10.0% makes the average Romanian county 11.9% more likely to attract a foreign investor. Industry-specific foreign and domestic agglomeration economies and labour conflicts also impact foreign direct investment location. A comparison with findings of other studies suggests that service agglomeration economies may be geographically quite localized. [image omitted] Hilber C. A. L. et Voicu I. Les economies d'agglomeration et la localisation de l'Investissement direct etranger: des preuves empiriques provenant de la Roumanie, Regional Studies. Cet article approfondit le flux important d'Ide a destination de la Roumanie, suite a la revolution de 1989, afin d'etudier les determinants de la localisation de l'Ide dans les economies de transition. A partir d'un modele du type logit conditionnel et des effets specifiques aux choix, il s'avere que des economies externes dues a l'agglomeration des services sont les principaux determinants de la localisation de l'Ide. Une hausse de la densite de l'emploi tertiaire de 10 pourcent rend le comte roumanien moyen 11.9 pourcent plus susceptible d'attirer un investisseur etranger. Des economies d'agglomeration interieures et exterieures, specifiques a l'industrie, et les conflits du travail influent aussi sur la localisation de l'Ide. Une comparaison avec les resultats des etudes anterieures laisse supposer que les economies d'agglomeration du secteur tertiaire pourraient s'averer assez localisees du point de vue geographique. Economies d'agglomeration Investissement direct etranger Economies de transition Hilber C. A. L. und Voicu I. Agglomerationsvorteile und der Standort von auslandischen Direktinvestitionen: empirische Evidenz aus Rumanien, Regional Studies. Wir nutzen den starken Zustrom von auslandischen Direktinvestitionen nach Rumanien in der Zeit nach der Revolution von 1989 zur Analyse der Standorts-Determinanten von auslandischen Direktinvestitionen in Reformlandern. Mit Hilfe von konditionalen Logit-Modellen und von standortspezifischen fixen Effekten, zeigen wir auf, dass externe Effekte von dienstleistungsspezifischen Agglomerationsvorteilen die wichtigste Determinante der Standortwahl darstellen. Eine 10-prozentige Zunahme der Beschaftigungsdichte im Dienstleistungssektor in einem durchschnittlichen rumanischen Bezirk erhoht die Wahrscheinlichkeit, dass ein auslandischer Investor angezogen wird, um 11.9 Prozent. Auch branchenspezifische auslandische und einheimische Agglomerationsvorteile sowie ...

While residents receive similar benefits from many local government programs, only about one-third of all households have children in public schools. We argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools. We identify a proxy for the extent of capitalization-the supply of land available for new development-and show that towns in Massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock. Towns with little available land also spend more on schools. We extend these results using data from school districts in 46 states, showing that per pupil spending is positively related to the percentage of developed land. This positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home. Our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending.