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Schools and Location: Tiebout, Alonso, and Government Policy

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  • Eric A. Hanushek
  • Kuzey Yilmaz

Abstract

An important element in considering school finance policies is that households are not passive. Instead they respond to policies with a combination of modified residential choice and political choice of tax levels. The highly stylized decision models of most existing analyses, however, lead to conerns about the policy evaluations. In our general equilibrium model of residential location and community choice, households base optimizing decisions on commuting costs, school quality, and land rents. With both centralized and decentralized employment, the resulting equilibrium has heterogeneous communities in terms of income and tastes for schools. This model is used to analyze a series of conventional policy experiments, including school district consolidation, district power utilization, and different equalization devices. The important conclusion is that welfare falls for all families with the restrictions in choice that are implied by these approaches.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12960.

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Date of creation: Mar 2007
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Publication status: published as Hanushek, Eric and Kuzey Yilmaz. "The Complementarity of Tiebout and Alonso." Journal of Housing Economics 16, 2 (June 2007): 243-261.
Handle: RePEc:nbr:nberwo:12960

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Cited by:
  1. Leung, Charles Ka Yui & Ma, Wai Yip & Zhang, Jun, 2013. "The Market Valuation of Interior Design and Developers strategies: a simple Theory and some Evidence," MPRA Paper 43896, University Library of Munich, Germany.
  2. Leung, Charles Ka Yui & Chow, Kenneth & Yiu, Matthew & Tam, Dickson, 2010. "House Market in Chinese Cities: Dynamic Modeling, In-Sampling Fitting and Out-of-Sample Forecasting," MPRA Paper 27367, University Library of Munich, Germany.
  3. Kenneth K. Chow & Matthew S. Yiu & Charles Ka Yui Leung & Dickson C. Tam, 2008. "Does the DiPasquale-Wheaton Model Explain the House Price Dynamics in China Cities?," Working Papers 212008, Hong Kong Institute for Monetary Research.

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