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

Marco Fregoni (), Marco Leonardi and Sauro Mocetti
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Marco Fregoni: University of Milan

No 1261, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

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.

Keywords: fiscal rules; urbanization revenues; land use regulation; building permits; firms’ entry; employment. (search for similar items in EconPapers)
JEL-codes: D73 H72 R31 R33 R52 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ure
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