Public Goods as a Screening Mechanism
AbstractCourt decisions in the past twenty years such as Southern Burlington County NAACP v. Mount Laurel Associated, as well recent legislation, have made exclusionary zoning laws based on race illegal and have limited, at least in many states, the legality of exclusionary zoning based on income. While there may be a number of reasons for the use of exclusionary or fiscal zoning, an economic rationale suggested by Hamilton (1975) is that fiscal zoning, in the form of minimum housing standards, can reduce or eliminate the divergence between tax payments and the cost of providing public services that arise from financing local public services through property taxes. In the absence of fiscal zoning an inefficient and possibly undefined equilibrium mix of residents among localities may exist. Fiscal zoning, by effectively requiring a minimum value of any house in the community, will lead to a minimum property tax payment for every household, thereby eliminating the possibility that the cost of public services received families with lower housing consumption and presumably income exceed the tax payments to them. Here we demonstrate that in the absence of zoning, higher income households, to ensure that low income households do not enter their community, can either increase their public services or subsidize goods consumed by higher income households but not lower income households. These strategies will make the rich community less attractive to the poor leading them to leave the community, thereby reducing the subsidy paid by the rich and increasing their utility.
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Bibliographic InfoPaper provided by EconWPA in its series Public Economics with number 9702001.
Length: 23 pages
Date of creation: 04 Feb 1997
Date of revision:
Note: Type of Document - Manuscript was created in Word for Windows; prepared on PC; to print on HP LaserJet 4P; pages: 23
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Find related papers by JEL classification:
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- H4 - Public Economics - - Publicly Provided Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-10-02 (All new papers)
- NEP-ENV-1998-10-02 (Environmental Economics)
- NEP-PBE-1998-10-02 (Public Economics)
- NEP-PUB-1998-10-02 (Public Finance)
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.:
- Westhoff, Frank, 1977. "Existence of equilibria in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 14(1), pages 84-112, February.
- Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August.
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