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The Productivity of Schools and Other Local Public Goods Providers


  • Caroline M. Hoxby


I construct an agency model of local public goods producers with special reference to public schools. The model assumes that households make Tiebout choices among jurisdictions, but it has more realistic assumptions about information and the cost of residential mobility. I examine producers' effort and rent under local property tax finance and centralized finance. I show that, if there are a sufficient number of jurisdictions to choose among, conventional local property tax finance substantially reduces the agency problem and associated loss of productivity. Specifically, I demonstrate that local property tax finance can attain about as much productivity as a social planner with centralized finance can, even if the social planner is armed with more information that a real social planner could plausibly have. The key insight is that decentralized Tiebout choices make some information the social planner would need verifiable and other information unnecessary.

Suggested Citation

  • Caroline M. Hoxby, 1999. "The Productivity of Schools and Other Local Public Goods Providers," NBER Working Papers 6911, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6911
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    References listed on IDEAS

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    Cited by:

    1. Marcelin Joanis, 2013. "Sharing the Blame? Local Electoral Accountability and Centralized School Finance in California," Economics and Politics, Wiley Blackwell, vol. 25(3), pages 335-359, November.
    2. Fábio D. Waltenberg, 2010. "Essential educational achievements as the currency of educational justice," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, June.
    3. repec:bla:obuest:v:79:y:2017:i:5:p:654-688 is not listed on IDEAS
    4. Eduardo Zegarra & Renato Ravina, 2003. "Teacher Unionization and the Quality of Education in Peru: An Empirical Evaluation Using Survey Data," IDB Publications (Working Papers) 3284, Inter-American Development Bank.
    5. Steve Bradley & Jim Taylor, 2010. "Diversity, Choice and the Quasi-market: An Empirical Analysis of Secondary Education Policy in England," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 1-26, February.
    6. Makris, Miltiadis, 2009. "Incentives for motivated agents under an administrative constraint," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 428-440, August.
    7. repec:taf:applec:v:49:y:2017:i:12:p:1164-1184 is not listed on IDEAS
    8. repec:spr:soinre:v:132:y:2017:i:1:d:10.1007_s11205-016-1258-9 is not listed on IDEAS
    9. Amir B. Ferreira Neto & Joshua Hall, 2017. "Economies of Scale and Governance of Library Systems: Evidence from West Virginia," Working Papers 17-13, Department of Economics, West Virginia University.
    10. James Malcomson & Timothy Besley, 2016. "Choice and Competition in Public Service Provision," Economics Series Working Papers Number 801, University of Oxford, Department of Economics.
    11. Daniel J. Henderson & Léopold Simar & Le Wang, 2017. "The three s of public schools: irrelevant inputs, insufficient resources and inefficiency," Applied Economics, Taylor & Francis Journals, vol. 49(12), pages 1164-1184, March.
    12. Ludger Woesmann, 2003. "Schooling Resources, Educational Institutions and Student Performance: the International Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(2), pages 117-170, May.
    13. repec:lan:wpaper:976 is not listed on IDEAS
    14. Roland G. Fryer, Jr, 2017. "Management and Student Achievement: Evidence from a Randomized Field Experiment," NBER Working Papers 23437, National Bureau of Economic Research, Inc.
    15. John Bishop & Ludger Wossmann, 2004. "Institutional Effects in a Simple Model of Educational Production," Education Economics, Taylor & Francis Journals, vol. 12(1), pages 17-38.
    16. Josep-Oriol Escardíbul & Nehal Helmy, 2015. "Decentralisation and school autonomy impact on the quality of education: the case of two MENA countries," Working Papers 2015/33, Institut d'Economia de Barcelona (IEB).
    17. repec:hpe:journl:y:2017:v:220:i:1:p:13-55 is not listed on IDEAS
    18. repec:pal:jorsoc:v:58:y:2007:i:8:d:10.1057_palgrave.jors.2602213 is not listed on IDEAS
    19. Oscar Montes Pineda & Luis Rubalcaba, 2014. "School choice, equity and efficiency: International evidence from PISA-2012," Investigaciones de Economía de la Educación volume 9,in: Adela García Aracil & Isabel Neira Gómez (ed.), Investigaciones de Economía de la Educación 9, edition 1, volume 9, chapter 31, pages 585-614 Asociación de Economía de la Educación.
    20. Caterina Calsamiglia & Francisco Martinez-Mora & Antonio Miralles, 2017. "Sorting in public school districts under the Boston Mechanism," Working Papers 949, Barcelona Graduate School of Economics.
    21. Andreas Ammermueller, 2013. "Institutional Features of Schooling Systems and Educational Inequality: Cross-Country Evidence From PIRLS and PISA," German Economic Review, Verein für Socialpolitik, vol. 14(2), pages 190-213, May.
    22. Marta Zieba & Carol Newman, 2012. "Organisational Structure and Managerial Efficiency: A quasi-experimental analysis of German public theatres," Working Papers WP032012, University of Limerick, Department of Economics, revised Oct 2012.
    23. repec:kap:jproda:v:49:y:2018:i:1:d:10.1007_s11123-017-0517-3 is not listed on IDEAS
    24. Caterina Calsamiglia & Francisco Martínez-Mora & Antonio Miralles, 2015. "School Choice Mechanisms, Peer Effects and Sorting," Discussion Papers in Economics 15/01, Department of Economics, University of Leicester.

    More about this item

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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