An extensive set of land use regulations shape the geography of most major US cities. I study how the distribution of these restrictions affects the location of industries within the city, aggregate productivity, and welfare. In a theoretical framework, the welfare effects of density restrictions depend on the strength of spillover effects, which I estimate using multiple datasets on economic activity within New York City. The estimates based on variation in the historical zoning reform imply higher productive externalities in the office sector and negative amenity externalities in the industrial sectors. Counterfactual policy simulations show that current density restrictions are very costly — increasing allowed density in the city by 5% leads to a welfare gain of 1%. Heterogeneity across sectors magnifies the welfare effects of restrictions on the office sector and in the city center.
The Anti-Competitive Effects of Input Tariff Liberalization (with Yipei Zhang)
Despite rich literature on the pro-competitive welfare effects from output tariff liberalization, little is known about the competitive effects of input tariff liberalization. By incorporating the impact of input tariff liberalization through the competitive channel, we predict lower gains from trade due to an anti-competitive effect of input tariff liberalization which pulls against the well-acknowledged pro-competitive effects of output tariff liberalization. We show that a positive correlation between firm market share and firm import share is both necessary and sufficient for the existence of the anti-competitive effect, the magnitude of which depends on several model parameters that govern domestic market concentration and home bias.