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The real effects of land use regulation: quasi-experimental evidence from a discontinuous policy variation

Author

Listed:
  • Marco Fregoni

    (University of Milan)

  • Marco Leonardi

    (University of Milan)

  • Sauro Mocetti

    (Banca d'Italia)

Abstract
We provide quasi-experimental evidence of the effects of a relaxation of land use constraints on local economic activity. We exploit the fact that in 1999 the central government imposed fiscal rules on municipal governments and in 2001 it relaxed them for municipalities with less than 5,000 inhabitants. First, we show that municipalities rely on the urbanization revenues that they collect from issuing building permits to avoid fiscal distress and to finance current expenditure. The rise of building permits is concentrated in the non-residential market and is stronger after 2003, when urban revenues were allowed to pay for municipalities’ current expenditures. Second, we exploit this de facto reduction of firms’ entry barriers to examine downstream effects. We find a positive impact on employment growth and firms’ entry that is concentrated in non-tradable sectors.

Suggested Citation

  • Marco Fregoni & Marco Leonardi & Sauro Mocetti, 2020. "The real effects of land use regulation: quasi-experimental evidence from a discontinuous policy variation," Temi di discussione (Economic working papers) 1261, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1261_20
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    fiscal rules; urbanization revenues; land use regulation; building permits; firms’ entry; employment.;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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