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Schools and location: Tiebout, Alonso, and governmental finance policy

Eric A. Hanushek, Kuzey Yilmaz
Published Date: 
December 2013
Journal of Public Economic Theory

Many discussions of school finance policy fail to consider how households respond to policies that change the attractiveness of different residential locations. We develop a general equilibrium model that incorporates workplace choice, residential choice, and political choice of tax and expenditure levels. Importantly, we consider multiple workplaces, a fundamental feature of today's metropolitan landscape. This basic model permits investigating how accessibility and public goods interact in a metropolitan area. The model is used to analyze two conventional policy initiatives: school district consolidation and district power equalization. The surprising conclusion is that school quality and welfare can fall for all families when these restrictions on choice are introduced.