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Cox (2010) raises the concern that the regressions in Huang and Tang (2010) may underestimate the effect of regulations on housing prices by including both a measure of geographic constraints and a measure of regulatory constraints on the right-hand side. We respond that omitting geographic constraints in our regressions may overestimate the effect of regulations. Empirically, we show that removing the geography variable from our regressions causes only minor increases in the estimated effects of regulation.
This article is a response to Constraints on Housing Supply: Natural and Regulatory by Wendell Cox (EJW, January 2011).