Research over the past several years has led to development of models characterizing equilibrium in a system of local jurisdictions. An important insight from these models is that plausible single-crossing assumptions about preferences generate strong predictions about the equilibrium distribution of households across communities. To date predictions have not been subjected to formal empirical tests. The purpose of this paper is to provide an integrated approach for testing predictions from this class of models. We first test conditions for locational equilibrium implied by these models. In particular about the distribution of households by income across communities. We then test the models predictions about the relationships among locational equilibrium conditions and housing prices. By drawing inferences from a structural general equilibrium model approach of this paper offers a unified treatment of theory and empirical testing.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6822.
Length: Date of creation: Dec 1998 Date of revision: Publication status: published as Journal of Political Economy, Vol. 107, no. 4 (August 1999): 645-681. Handle: RePEc:nbr:nberwo:6822
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Find related papers by JEL classification: C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
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