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Property Taxation, Zoning, and Efficiency in a Dynamic Tiebout Model

Author

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  • Levon Barseghyan
  • Stephen Coate

Abstract

This paper presents a dynamic Tiebout model and uses it to revisit a classic argument in public finance. The argument, due to Hamilton (1975), is that a system of governments financing services with property taxes will produce an efficient allocation of housing and services if governments can implement zoning ordinances. In the model, when governments choose zoning along with taxes and services, there does not exist an equilibrium that is both efficient and locally stable. Moreover, there exists an equilibrium in which governments over-zone and households over-consume housing. These findings challenge the Benefit View of the property tax.

Suggested Citation

  • Levon Barseghyan & Stephen Coate, 2016. "Property Taxation, Zoning, and Efficiency in a Dynamic Tiebout Model," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 1-38, August.
    • Handle: RePEc:aea:aejpol:v:8:y:2016:i:3:p:1-38
    Note: DOI: 10.1257/pol.20150050
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    Citations

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    Cited by:

    1. Levon Barseghyan & Stephen Coate, 2017. "On the Dynamics of Community Development," NBER Working Papers 23674, National Bureau of Economic Research, Inc.
    2. Pan, Chen-Yu, 2020. "Protections from natural disasters as local public goods: Migration and local adaptations," Regional Science and Urban Economics, Elsevier, vol. 85(C).
    3. Shangfa Hou & Jiaying Wang & Degui Zhu, 2022. "Has the Newly Imposed Property Tax Controlled Housing Prices? An Analysis of China’s 2009–2020 Interprovincial Panel Data," Sustainability, MDPI, vol. 14(22), pages 1-18, November.
    4. Barseghyan, Levon & Coate, Stephen, 2021. "Community development by public wealth accumulation," Journal of Urban Economics, Elsevier, vol. 121(C).
    5. Brueckner, Jan K., 2023. "JUE Insight: Zoning and property taxation revisited—Was Hamilton right?," Journal of Urban Economics, Elsevier, vol. 133(C).
    6. Stephen Coate & Yanlei Ma, 2017. "Evaluating The Social Optimality Of Durable Public Good Provision Using The Housing Price Response To Public Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(1), pages 3-31, February.
    7. Marco Bassetto & Leslie McGranahan, 2021. "Mobility, Population Growth, and Public Capital Spending in the United States," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 255-277, July.
    8. Matthew Davis & Fernando V. Ferreira, 2017. "Housing Disease and Public School Finances," NBER Working Papers 24140, National Bureau of Economic Research, Inc.
    9. Xiaokuai Shao, 2021. "Matching under school and home bundling," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(3), pages 567-611, June.
    10. Mintz, Mordekhay & Portnov, Boris A., 2023. "Social and environmental factors affecting the amount of property taxes collected by local authorities in Israel," Land Use Policy, Elsevier, vol. 133(C).

    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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