Spatial Rearrangement and the Tiebout Hypothesis: The Case of School Desegregation

Abstract

In his widely cited article, Tiebout [10] pictures a local economy in which consumerresidents choose to locate in jurisdictions which best satisfy their individual preferences for public and services. Households with strong preferences for schools or parks, for example, tend to locate together and tax themselves to provide the desired quantities of those public services. For Tiebout, the local provision of public and services amounts to the lumping together of all similar tastes for the purpose of making joint purchases [10, 421]. Although the importance is recognized of other factors in household location, such as accessibility to employment and neighborhood quality, this simple theory is widely accepted as a good description of the manner in which the public sector affects location in urban areas. The empirical validation of this theory has been based largely on the analysis of housing prices. According to Oates, if other things were held constant, values would be higher in a community the more attractive its package of public goods [7, 959]. In support of this, he finds that per pupil school expenditures exert a positive effect on housing prices while property tax rates exert a negative effect. Because higher housing prices imply, where supply is inelastic, that public services affect household demand for housing, Oates interprets this evidence as supporting the Tiebout hypothesis. Other studies have shown similar effects