Tiebout, local school finance and the ineffciency of head taxes
AbstractThe literature on local public (school) finance has shown that the use of local head taxes to finance schools leads to an effcient allocation of households and pupils to districts (Tiebout, 1956; Hamilton, 1975; Calabrese et al., 2009). This paper revises this well established result, using a two-community model with a housing market that adds two layers of realism to the analysis: not every household receives direct benefits from schools (e.g. some do not have children at school age) and communities are vertically differentiated, in the sense that one of them is exogenously preferred to the other by every household. In such context, head taxation leads to an ineffcient allocation of households to districts, even if local governments set local spending levels effciently given their population. The ineffciency emerges because too many intermediate income "in-school" households reside in the rich district in equilibrium. Income taxation is ineffcient as well but, in a counter-intuitive result, it may cause smaller effciency losses than a lump-sum tax.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/02.
Date of creation: May 2010
Date of revision:
Contact details of provider:
Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
- NEP-PBE-2010-10-23 (Public Economics)
- NEP-PUB-2010-10-23 (Public Finance)
- NEP-URE-2010-10-23 (Urban & Real Estate Economics)
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.:
- Ed Baldson & Eric Brunner, 2003.
"Intergenerational Conflict and the Political Economy of School Spending,"
2003-24, University of Connecticut, Department of Economics.
- Brunner, Eric & Balsdon, Ed, 2004. "Intergenerational conflict and the political economy of school spending," Journal of Urban Economics, Elsevier, vol. 56(2), pages 369-388, September.
- de Bartolome, Charles A. M. & Ross, Stephen L., 2004. "Who's in charge of the central city? The conflict between efficiency and equity in the design of a metropolitan area," Journal of Urban Economics, Elsevier, vol. 56(3), pages 458-483, November.
- de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo).
If references are entirely missing, you can add them using this form.