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Local policy, income, and housing prices

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  • Göbel, Jürgen

Abstract

In a local economy, the citizens can react on local policy by exit. Exit induces a shift in the housing demand. The local policy may thus capitalize into the housing prices. However, the citizens encounter specific coordination problems on the housing market. Therefore, it may be asked how effective their exit option is. To answer this question, we work with a sample of 234 U.S. counties, from 2002 and 2003. Our empirical analysis shows that the property tax revenue is the local fiscal variable which has the strongest connection with the housing prices. In contradiction to the general theory, this connection is positive and indirect. The essential element within this connection is the personal income.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14053.

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Date of creation: 28 Feb 2009
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Handle: RePEc:pra:mprapa:14053

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Keywords: local policy; exit; housing price; capitalization;

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  1. Quigley, John M., 2006. "Urban Economics," Berkeley Program on Housing and Urban Policy, Working Paper Series qt0jr0p2tk, Berkeley Program on Housing and Urban Policy.
  2. Hoyt, William H. & Rosenthal, Stuart S., 1997. "Household Location and Tiebout: Do Families Sort According to Preferences for Locational Amenities?," Journal of Urban Economics, Elsevier, vol. 42(2), pages 159-178, September.
  3. Wales, T J & Wiens, E G, 1974. "Capitalization of Residential Property Taxes: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 329-33, August.
  4. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753.
  5. Hwang, Min & Quigley, John M., 2006. "Economic Fundamentals in Local Housing Markets: Evidence from U.S. Metropolitan Regions," Berkeley Program on Housing and Urban Policy, Working Paper Series qt79d325cm, Berkeley Program on Housing and Urban Policy.
  6. Allen C. Goodman, 1983. "Capitalization of Property Tax Differentials within and among Municipalities," Land Economics, University of Wisconsin Press, vol. 59(2), pages 211-219.
  7. Hoxby, Caroline M., 1999. "The productivity of schools and other local public goods producers," Journal of Public Economics, Elsevier, vol. 74(1), pages 1-30, October.
  8. Oates, Wallace E, 1973. "The Effects of Property Taxes and Local Public Spending on Property Values: A Reply and Yet Further Results," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 1004-08, July-Aug..
  9. Pollakowski, Henry O, 1973. "The Effects of Property Taxes and Local Public Spending on Property Values: A Comment and Further Results," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 994-1003, July-Aug..
  10. King, A Thomas, 1977. "Estimating Property Tax Capitalization: A Critical Comment," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 425-31, April.
  11. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  12. Henry, O.T. & Olekalns, N., 1999. "A Comment on," Department of Economics - Working Papers Series 719, The University of Melbourne.
  13. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
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