The Effects of Land-Use Regulation and Transport Infrastructure on the Distribution of Economic Activity

Using data from Santiago, Chile, we study the impact of increased accessibility on residential floor space and its heterogeneity across income, distance to the CBD, floor space density, and zoning regulation. We find an average floor space elasticity of 0.9, which is consistent with the literature. The primary source of heterogeneity comes from socioeconomic status and regulation. We find that for the wealthiest quintile, the elasticity is not statistically different from zero for the more strictly regulated blocks. However, it is more than four times the average elasticity in the least regulated blocks. Baseline regulation is initially restrictive and becomes more stringent in response to new transport infrastructure. Nevertheless, the elasticity is homogeneous for the rest of the population because the regulation was originally permissive enough to accommodate increased supply. Land-use regulation limits housing supply and welfare gains from transport infrastructure improvements