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Local policy, income, and housing prices


  • Göbel, Jürgen


In a local economy, the citizens can react on local policy by exit. Exit induces a shift in the housing demand. The local policy may thus capitalize into the housing prices. However, the citizens encounter specific coordination problems on the housing market. Therefore, it may be asked how effective their exit option is. To answer this question, we work with a sample of 234 U.S. counties, from 2002 and 2003. Our empirical analysis shows that the property tax revenue is the local fiscal variable which has the strongest connection with the housing prices. In contradiction to the general theory, this connection is positive and indirect. The essential element within this connection is the personal income.

Suggested Citation

  • Göbel, Jürgen, 2009. "Local policy, income, and housing prices," MPRA Paper 14053, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14053

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    References listed on IDEAS

    1. Hoxby, Caroline M., 1999. "The productivity of schools and other local public goods producers," Journal of Public Economics, Elsevier, vol. 74(1), pages 1-30, October.
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    5. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
    6. Quigley, John M., 2006. "Urban Economics," Berkeley Program on Housing and Urban Policy, Working Paper Series qt0jr0p2tk, Berkeley Program on Housing and Urban Policy.
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    8. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
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    10. Min Hwang & John M. Quigley, 2006. "Economic Fundamentals In Local Housing Markets: Evidence From U.S. Metropolitan Regions," Journal of Regional Science, Wiley Blackwell, vol. 46(3), pages 425-453.
    11. Bruce W. Hamilton, 1975. "Zoning and Property Taxation in a System of Local Governments," Urban Studies, Urban Studies Journal Limited, vol. 12(2), pages 205-211, June.
    12. Wales, T J & Wiens, E G, 1974. "Capitalization of Residential Property Taxes: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 329-333, August.
    13. Pollakowski, Henry O, 1973. "The Effects of Property Taxes and Local Public Spending on Property Values: A Comment and Further Results," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 994-1003, July-Aug..
    14. Hoyt, William H. & Rosenthal, Stuart S., 1997. "Household Location and Tiebout: Do Families Sort According to Preferences for Locational Amenities?," Journal of Urban Economics, Elsevier, vol. 42(2), pages 159-178, September.
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    local policy; exit; housing price; capitalization;

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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