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Why do households without children support local public schools? linking house price capitalization to school spending

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Author Info
Christian A. L. Hilber
Christopher J. Mayer

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Abstract

While residents receive similar benefits from many local public expenditures, only about one-third of all households have children in the public schools. In this paper the authors argue that capitalization of school spending into house prices can encourage residents to support spending on schools, even if the residents themselves will never have children in the schools. To examine this hypothesis, the authors take advantage of differences across communities in the extent of house price capitalization based on the availability of land or population density. They show that fiscal variables and amenities are capitalized to a much greater extent in Massachusetts cities and towns with little available land and that these localities also spend more on schools. Next, the authors use data from school districts in 49 states to show that per pupil spending is positively related to population density, a proxy for the availability of land. Consistent with a model tying house price capitalization to school spending, the authors show that the positive correlation between density and spending persists only in locations with high homeownership rates. Communities with a higher percentage of residents above 65 years old have increased school expenditures only in places with high population densities, and this correlation grows for the percentage of elderly above 75 or 85 years old who have a shorter expected duration in their house. The positive relationship between percentage elderly and school spending is confined to central cities and suburbs of large metropolitan areas and does not exist in places where land for new construction may be easier to obtain. These results support models in which house price capitalization encourages more efficient provision of public services and provide an explanation for why some elderly residents might support local spending on schools.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 02-10.

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Date of creation: 2002
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Handle: RePEc:fip:fedpwp:02-10

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Keywords: Education;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Donald Haurin & David Brasington, 1996. "The Impact of School Quality on Real House Prices: Interjurisdictional Effects," Working Papers 010, Ohio State University, Department of Economics. [Downloadable!]
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    Other versions:
  6. Edelson, Noel M., 1976. "Voting equilibria with market-based assessments," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 269-284. [Downloadable!] (restricted)
  7. Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, vol. 66(5), pages 743-53, December. [Downloadable!] (restricted)
  8. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York. [Downloadable!]
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  9. Hoxby, Caroline M, 1998. "How Much Does School Spending Depend on Family Income? The Historical Origins of the Current School Finance Dilemma," American Economic Review, American Economic Association, vol. 88(2), pages 309-14, May. [Downloadable!] (restricted)
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    Other versions:
  13. David M. Cutler & Douglas W. Elmendorf & Richard J. Zeckhauser, 1993. "Demographic Characteristics and the Public Bundle," NBER Working Papers 4283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    Other versions:
  17. Brueckner, Jan K. & Joo, Man-Soo, 1991. "Voting with capitalization," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 453-467, November. [Downloadable!] (restricted)
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    Other versions:
  21. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April. [Downloadable!] (restricted)
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    Other versions:
  23. Sonstelie, Jon C. & Portney, Paul R., 1978. "Profit maximizing communities and the theory of local public expenditure," Journal of Urban Economics, Elsevier, vol. 5(2), pages 263-277, April. [Downloadable!] (restricted)
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    Other versions:
  26. Gyourko, Joseph & Kahn, Matthew & Tracy, Joseph, 1999. "Quality of life and environmental comparisons," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 37, pages 1413-1454 Elsevier. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Byron F. Lutz, 2009. "Fiscal amenities, school finance reform and the supply side of the Tiebout market," Finance and Economics Discussion Series 2009-18, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  2. Theodore M. Crone, 2006. "Capitalization of the quality of local public schools: what do home buyers value?," Working Papers 06-15, Federal Reserve Bank of Philadelphia. [Downloadable!]
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This page was last updated on 2009-11-18.

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