ESSAYS ON THE ECONOMICS OF LAND USE REGULATION AND POLITICAL CYCLE

Abstract

This thesis is an empirical analysis of the effects of relaxing land use regulation on the housing market and local economic activity. The existence of a political cycle and a term-limit effect on the issue of building permits to benefit voters is also investigated. The first chapter provides quasi-experimental evidence on the effects of a relaxation of land use constraints on the housing market and local economic activity. I exploit the fact that in 1999 the central government imposed fiscal rules on municipal governments and in 2001 relaxed them for municipalities below 5,000 inhabitants. I find that municipalities rely on urban revenues they collect from releasing building permits to avoid fiscal distress and finance current expenditure. The rise of building permits is concentrated in the non-residential market and has represented de facto a reduction of entry barriers. As downstream effects, I find an increase of employment and firms' entry. This second chapter provides evidence on the existence of an opportunistic electoral cycle in the issue of building permits at the local level in Italy from 1995 to 2014, using monthly data for the universe of municipalities. Mayors tend to exert pressure on administrative offices to ease or speed-up the release of permits, an outcome which is more controllable and targetable than fiscal ones. A within-term analyses shows the absence of cycle in the last-term, since the lack of incentive for the incumbents that cannot run for re-election: this allows to exclude any reputation incentive. The political cycle is significant for cities below 15,000 inhabitants and it is visible both in the northern and southern regions.