The Productivity of Schools and Other Local Public Goods Providers
AbstractI construct an agency model of local public goods producers with special reference to public schools. The model assumes that households make Tiebout choices among jurisdictions, but it has more realistic assumptions about information and the cost of residential mobility. I examine producers' effort and rent under local property tax finance and centralized finance. I show that, if there are a sufficient number of jurisdictions to choose among, conventional local property tax finance substantially reduces the agency problem and associated loss of productivity. Specifically, I demonstrate that local property tax finance can attain about as much productivity as a social planner with centralized finance can, even if the social planner is armed with more information that a real social planner could plausibly have. The key insight is that decentralized Tiebout choices make some information the social planner would need verifiable and other information unnecessary.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6911.
Date of creation: Jan 1999
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Publication status: published as Journal of Public Economics (1999).
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Find related papers by JEL classification:
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
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