Suburbanization and homeownership rates
AbstractHomeownership rates in suburbs are much higher than in central cities. This paper shows that the systematic difference between homeownership rates causes suburbanization. We consider an economy with several regions: the central city, where most households rent, and the suburbs, where most own. Households migrate and vote on local policies. Renters do not consider the effect of policies on house prices. Therefore, renter dominated central cities provide public goods inefficiently and have high taxes and high debt. Since house prices are lower in the central city, few houses are built and households migrate to the suburbs as houses depreciate. The durability of houses has two effects: it provides owners with incentives to vote for efficient policies and it makes inefficient policies sustainable.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 382.
Date of creation: Jul 2008
Date of revision:
Suburbanization; homeownership; migration; local public debt; local public goods; house prices;
Find related papers by JEL classification:
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-05 (All new papers)
- NEP-GEO-2008-09-05 (Economic Geography)
- NEP-MIG-2008-09-05 (Economics of Human Migration)
- NEP-PBE-2008-09-05 (Public Economics)
- NEP-URE-2008-09-05 (Urban & Real Estate Economics)
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