  The paper examines the effects of stringent land use regulations, measured
using the Wharton Residential Land Use Regulatory Index (WRLURI), on employment
growth during the period 2010-2020 in the Retail, Professional, and Information
sectors across 878 local jurisdictions in the United States. All the local
jurisdictions exist in both (2006 and 2018) waves of the WRLURI surveys and
hence constitute a unique panel data. We apply a mediation analytical framework
to decompose the direct and indirect effects of land use regulation stringency
on sectoral employment growth and specialization. Our analysis suggests a fully
mediated pattern in the relationship between excessive land use regulations and
employment growth, with housing cost burden as the mediator. Specifically, a
one standard deviation increase in the WRLURI index is associated with an
approximate increase of 0.8 percentage point in the proportion of cost burdened
renters. Relatedly, higher prevalence of cost-burdened renters has moderate
adverse effects on employment growth in two sectors. A one percentage point
increase in the proportion of cost burdened renters is associated with 0.04 and
0.017 percentage point decreases in the Professional and Information sectors,
respectively.
