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Local Public Good Provision: Voting, Peer Effects, and Mobility

  • Stephen Calabrese
  • Dennis Epple
  • Thomas Romer
  • Holger Sieg
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    Few empirical strategies have been developed that investigate public provision under majority rule while taking explicit account of the constraints implied by mobility of households. The goal of this paper is to improve our understanding of voting in local communities when neighborhood quality depends on peer or neighborhood effects. We develop a new empirical approach which allows us to impose all restrictions that arise from locational equilibrium models with myopic voting simultaneously on the data generating process. We can then analyze how close myopic models come in replicating the main regularities about expenditures, taxes, sorting by income and housing observed in the data. We find that a myopic voting model that incorporates peer effects fits all dimensions of the data reasonably well.

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    File URL: http://www.nber.org/papers/w11720.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11720.

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    Date of creation: Oct 2005
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    Publication status: published as Calabrese, Stephen, Dennis Epple, Thomas Romer and Holger Sieg. "Local Public Good Provision: Voting, Peer Effects, And Mobility," Journal of Public Economics, 2006, v90(6-7,Aug), 959-981.
    Handle: RePEc:nbr:nberwo:11720
    Note: PE
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Arcidiacono, Peter & Nicholson, Sean, 2005. "Peer effects in medical school," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 327-350, February.
    2. Brock, William A & Durlauf, Steven N, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 235-60, April.
    3. James M. Poterba, 1992. "Taxation and Housing: Old Questions, New Answers," NBER Working Papers 3963, National Bureau of Economic Research, Inc.
    4. Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, . "Estimating the General Equilibrium Benefits of Large Changes in Spatially Delineated Public Goods," GSIA Working Papers 2003-07, Carnegie Mellon University, Tepper School of Business.
    5. Caroline Hoxby, 2000. "Peer Effects in the Classroom: Learning from Gender and Race Variation," NBER Working Papers 7867, National Bureau of Economic Research, Inc.
    6. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
    7. David M. Cutler & Edward L. Glaeser & Jacob L. Vigdor, 1999. "The Rise and Decline of the American Ghetto," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 455-506, June.
    8. Rubinfeld, Daniel L & Shapiro, Perry & Roberts, Judith, 1987. "Tiebout Bias and the Demand for Local Public Schooling," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 426-37, August.
    9. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
    10. Rajiv Sethi & Rohini Somanathan, 2001. "Inequality and Segregation," Microeconomics 0108005, EconWPA.
    11. Jesse M. Rothstein, 2006. "Good Principals or Good Peers? Parental Valuation of School Characteristics, Tiebout Equilibrium, and the Incentive Effects of Competition among Jurisdictions," American Economic Review, American Economic Association, vol. 96(4), pages 1333-1350, September.
    12. Fernando Ferreira, 2008. "You Can Take it With You: Proposition 13 Tax Benefits, Residential Mobility, and Willingness to Pay for Housing Amenities," Working Papers 08-15, Center for Economic Studies, U.S. Census Bureau.
    13. Bergstrom, Theodore C & Rubinfeld, Daniel L & Shapiro, Perry, 1982. "Micro-Based Estimates of Demand Functions for Local School Expenditures," Econometrica, Econometric Society, vol. 50(5), pages 1183-1205, September.
    14. Steven N. Durlauf, 1992. "A Theory of Persistent Income Inequality," NBER Working Papers 4056, National Bureau of Economic Research, Inc.
    15. Dennis Epple & Thomas Romer & Holger Sieg, 2001. "Interjurisdictional Sorting and Majority Rule: An Empirical Analysis," Econometrica, Econometric Society, vol. 69(6), pages 1437-1465, November.
    16. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
    17. Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
    18. Summers, Anita A & Wolfe, Barbara L, 1977. "Do Schools Make a Difference?," American Economic Review, American Economic Association, vol. 67(4), pages 639-52, September.
    19. Katharine L. Bradbury, 1988. "Shifting property tax burdens in Massachusetts," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 36-48.
    20. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
    21. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
    22. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
    23. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
    24. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
    25. Bayer, Patrick & Timmins, Christopher, 2005. "On the equilibrium properties of locational sorting models," Journal of Urban Economics, Elsevier, vol. 57(3), pages 462-477, May.
    26. Sieg, Holger & Smith, V. Kerry & Banzhaf, H. Spencer & Walsh, Randy, 2002. "Interjurisdictional housing prices in locational equilibrium," Journal of Urban Economics, Elsevier, vol. 52(1), pages 131-153, July.
    27. Dunz, Karl, 1989. "Some comments on majority rule equilibria in local public good economies," Journal of Economic Theory, Elsevier, vol. 47(1), pages 228-234, February.
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