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Suburbanization and homeownership rates

Author

Listed:
  • Wolfgang R. K�hler

Abstract

Homeownership rates in suburbs are much higher than in central cities. This paper shows that the systematic difference between homeownership rates causes suburbanization. We consider an economy with several regions: the central city, where most households rent, and the suburbs, where most own. Households migrate and vote on local policies. Renters do not consider the effect of policies on house prices. Therefore, renter dominated central cities provide public goods inefficiently and have high taxes and high debt. Since house prices are lower in the central city, few houses are built and households migrate to the suburbs as houses depreciate. The durability of houses has two effects: it provides owners with incentives to vote for efficient policies and it makes inefficient policies sustainable.

Suggested Citation

  • Wolfgang R. K�hler, 2008. "Suburbanization and homeownership rates," IEW - Working Papers 382, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:382
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    File URL: http://www.econ.uzh.ch/static/wp_iew/iewwp382.pdf
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    Keywords

    Suburbanization; homeownership; migration; local public debt; local public goods; house prices;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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