Edge Versus Center: Finding Common Ground in the Capitalization Debate
32 Pages Posted: 25 Sep 2003
Date Written: May 30, 2002
A continuing debate questions whether capitalization of taxes and public services into house price occurs. The current study argues for an inverse relationship between housing supply elasticity and capitalization rates. A sample is split into houses on the interior and edge of the urban area. Capitalization of schooling and crime occurs everywhere, but it is weaker toward the edge of an urban area where housing supply elasticities and developer activity are greater. Tax results are less robust, but the capitalization rates of crime and school quality are roughly twice as strong on the interior than on the urban fringe.
Keywords: capitalization, house price hedonic, local public goods, education, crime, taxes
JEL Classification: H40, R31, R21
Suggested Citation: Suggested Citation