Governments may extract rent from private citizens by inflating taxes and spending on projects benefiting special interests. Using a spatial equilibrium model, I show that less elastic housing supplies increase governments' abilities to extract rents. Inelastic housing supply, driven by exogenous variation in local topography, raises local governments' tax revenues and causes citizens to combat rent seeking by enacting laws limiting the power of elected officials. I find that public sector workers, one of the largest government special interests, capture a share of these rents through increased compensation when collective bargaining is legal or through corruption when collective bargaining is outlawed.
"Housing Supply Elasticity and Rent Extraction by State and Local Governments."
American Economic Journal: Economic Policy,
State and Local Taxation, Subsidies, and Revenue
State and Local Budget and Expenditures
Public Sector Labor Markets
Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining
Housing Supply and Markets
Finance in Urban and Rural Economies