Chang-Tai Hsieh and Enrico Moretti’s 2019 article, “Housing Constraints and Spatial Misallocation” is a much-cited and extremely influential paper within the literature on the financial results of zoning. It finds that exclusionary zoning restrictions in a number of main US metro areas had giant unfavourable results on the financial system. Between 1964 and 2009, the authors concluded, they lowered GDP to the purpose the place it was 8.9% decrease in 2009 than it could have been if these jurisdictions had solely common ranges of zoning restrictions.
In 2021, economist Bryan Caplan identified methodological errors within the authors’ calculations, which—when corrected—confirmed they significantly underestimated the unfavourable results of zoning. The authors acknowledged they’d erred, and the obvious web impact was to additional strengthen the case in opposition to zoning.
Not too long ago, economist Brian Greaney of the College of Washington posted a critique the Hsieh-Moretti article through which he argues they made severe methodological errors that, when corrected, severely weaken their conclusions. In contrast to within the case of Caplan’s critique, this time the authors haven’t admitted error. Hsieh has posted a response to Greaney (drawn from his referee report on Greaney’s paper), and Greaney, in flip, has posted a rejoinder. Housing coverage professional Salim Furth has a useful overview of the problems raised by Greaney although he solely briefly notes Hsieh’s response).
This debate is ongoing, and it isn’t but clear to what extent the Hsieh-Moretti article will find yourself being discredited. The problems concerned are technical in nature, so I can not simply summarize them right here. readers must learn the article, critique, response, and rejoinder for themselves, to get a way of what’s going on. And, sadly, a lot of it’s not simply accessible to these with no background in econometrics. Greaney’s paper has not—thus far—been printed, and it isn’t completely clear whether or not it’s going to survive peer assessment, and what it’s going to appear to be in its remaining kind (assuming publication).
Nonetheless, my tentative judgment is that Greaney has at the very least raised severe questions in regards to the article’s mannequin and use of knowledge. On the very least, students and coverage analysts must be extra cautious in citing the Hsieh-Moretti examine except and till these doubts are resolved.
As well as, the truth that the article had already been proven to have one vital methodological error (the one Caplan discovered) ought to, on reflection, have led extra of us to wonder if there have been others.
I really feel an obligation to emphasise these factors as a result of I’m a longtime critic of zoning and have cited the Hsieh-Moretti examine in varied writings of my very own. I additionally highlighted the error recognized by Caplan, declaring the way it strengthened the case in opposition to zoning. Mental honesty requires declaring new evaluation that cuts the opposite manner, too.
The Hsieh-Moretti examine is way from the one one which finds giant unfavourable results of zoning on the financial system, housing availability, and alternatives for the poor and minorities. I cited others in Chapter 2 of my guide Free to Transfer. As Furth notes in his commentary on this debate, economists Gilles Duranton and Diego Puga have reached very related conclusions to Hsieh and Moretti’s in a examine that avoids the doable errors Greaney argues undermine the latter.
Thus, I proceed to imagine that zoning has giant unfavourable results, and that the majority restrictions on housing development must be abolished. However I do need to admit the case for that place is weaker on the margin than it could be if there weren’t severe questions in regards to the validity of the Hsieh-Moretti article.