That is the title of a new paper by Gilles Duranton and Diego Puga. This piece goes considerably beyond previous research by having a more explicit model of both urban-rural interactions, and also possible congestion costs arising from more YIMBY. Here are a few results of the paper:
1. If you restricted New York City and Los Angeles to the size of Chicago, 18.9 million people would be displaced and per capita rural income would fall by 3.6%, due to diminishing returns to labor in less heavily populated areas.
2. The average reduction in real income per person, from this thought experiment, would be 3.4%. You will note that NIMBY policies are in fact running a version of this policy, albeit at different margins and with a different default status quo point.
3. If you were to force America’s 11 largest cities to be no larger than Miami, real income per American would fall by 7.9%.
4. If planning regulations were lifted entirely, NYC would reach about 40 million people, Philadelphia 38 million (that’s a lot of objectionable sports fans!), and Boston just shy of 30 million (ditto).
5. Output per person, under that scenario, would rise in NYC by 5.7% and by 13.3% in Boston. That said, under this same scenario incumbent New Yorkers would see net real consumption losses of 13%, whereas for Boston the incumbent losses are only about 1.1%.
6. The big winners are the new entrants. On average, real income would rise by 25.7%.
7. Alternatively, in their model, rather than laissez-faire, if America’s three most productive cities relaxed their planning regulations to the same level as the median U.S. city, real per capita income would rise by about 8.2%.
8. In all of these cases the authors calculate the change in rural per capita income, based on resulting population reallocations.
Recommended, I am very glad to see more serious work in this area.