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

Author/s
Eric A. Hanushek
Kuzey Yilmaz
Published Date
Dec-13
Publication
Journal of Public Economic Theory
Details
15(6)
Pages
pp. 829-855
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.