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Housing supply elasticity and growth: evidence from Italian cities

Antonio Accetturo (), Andrea Lamorgese (), Sauro Mocetti () and Dario Pellegrino

No 1267, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The paper examines the impact of housing supply elasticity on urban development. Using data for a sample of around one hundred Italian main cities observed over 40 years, we first estimate housing supply elasticities at the city level. Second, we show that differences in the elasticity of housing supply may determine the extent to which a demand shock translates into more intense employment growth or more expensive houses. To address endogeneity of housing supply elasticity, we exploit a synthetic measure of physical constraints to residential development as an instrumental variable. We find that an exogenous increase in labour demand determines a rise in employment and housing prices; however, in cities with a less elastic housing supply the impact on economic growth is significantly lessened while the effects on house prices are greater.

Keywords: housing supply elasticity; city growth; house prices; physical constraints (search for similar items in EconPapers)
JEL-codes: R11 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-eur, nep-geo and nep-ure
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