Fiscal Zoning and Fiscal Externalities

Abstract

This research studies the location of development within general purpose local governments that are overlapped by multiple independent school districts. The tested hypothesis is that local governments will be more permissive in granting development rights within its boundaries as their share of the school district’s total area declines because the fiscal costs of student education are shared across communities outside the government’s boundaries. Data is drawn from GIS satellite imagery on the development of land between 2001 and 2011 in Ohio. The preferred estimates employ a border discontinuity strategy that examines development intensity within 0.2 miles of school district boundaries inside government. The school district on the side of the boundary with the larger share of its land area coming from the general government was less likely to have experienced growth in development intensity by a substantive and statistically significant amount. Further investigation reveals that the effect is entirely driven by incorporated cities and villages, and there is no evidence of the phenomenon among unincorporated governments.