Housing Supply Elasticity and Rent Extraction by State and Local Governments

Rebecca Diamond

Research Papers from Stanford University, Graduate School of Business

Abstract: Governments may extract rent from private citizens by inflating taxes and spending on projects which benefit special interests. Using a spatial equilibrium model, I show that less elastic housing supplies increase governments' abilities to extract rents. Inelastic housing supply elasticity, driven by exogenous variation in local topography, raises local governments' tax revenue. I find that public sector workers, one of the largest government special interests, capture a share of these rents either through increased compensation when formal collective bargaining is legal or by increased corruption when collective bargaining is outlawed.

Date: 2015-07
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Journal Article: Housing Supply Elasticity and Rent Extraction by State and Local Governments (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3330

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