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On the Political Economy of Land Value Capitalization and Local Public Sector Rent-Seeking in a Tiebout Model

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  • Joseph Gyourko
  • Joseph S. Tracy

Abstract

In this paper we examine the political economy. of capitalization in a Tiebout model when there is a rent-seeking public bureaucracy. A new approach is suggested for testing for the influence of successful local public sector rent-seeking on local property values. We present empirical evidence showing that property values are lower in cities which pay their public sector workers significantly more than similar public sector workers earn in other cities. Finally, we discuss how the regulatory process can be used to distribute rents arising from a short-run Tiebout disequilibrium to landowners, public sector workers, and renters.

Suggested Citation

  • Joseph Gyourko & Joseph S. Tracy, 1986. "On the Political Economy of Land Value Capitalization and Local Public Sector Rent-Seeking in a Tiebout Model," NBER Working Papers 1919, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1919
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    2. Jipeng Zhang & Jianyong Fan & Jiawei Mo, 2017. "Government Intervention, Land Market, And Urban Development: Evidence From Chinese Cities," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 115-136, January.
    3. Cho, Seong-Hoon & Wu, JunJie, 2002. "Environmental Amenities And Community Characteristics: An Empirical Study Of Portland, Oregon," 2002 Annual meeting, July 28-31, Long Beach, CA 19863, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. De Witte, Kristof & Geys, Benny & Schönhage, Nanna Lauritz, 2018. "Strategic public policy around population thresholds," Journal of Urban Economics, Elsevier, vol. 106(C), pages 46-58.
    5. Thomas J. Holmes & Lee E. Ohanian, 2014. "Pay with Promises or Pay as You Go? Lessons from the Death Spiral of Detroit," Staff Report 501, Federal Reserve Bank of Minneapolis.
    6. Cragg, Michael & Kahn, Matthew, 1997. "New Estimates of Climate Demand: Evidence from Location Choice," Journal of Urban Economics, Elsevier, vol. 42(2), pages 261-284, September.

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