Capitalization and Community Size

Posted: 12 Sep 2003

See all articles by David M. Brasington

David M. Brasington

University of Cincinnati - Department of Economics

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Abstract

Studies often show taxes and public services capitalized into house prices, but no one has tested whether the rate of capitalization depends on community size. The theoretical model of Hoyt (Regional Science and Urban Economics, 29, 155-171, 1999) predicts that capitalization occurs, but that the rate of capitalization is weaker in large communities. Hoyt's model is tested empirically using a house price hedonic framework. The tax capitalization results are less clear, but the school quality and crime results firmly support the model's predictions. Using both school districts and municipalities to measure communities, larger communities weaken the rate of capitalization.

Keywords: capitalization, market power, price of housing, hedonic, local public goods

JEL Classification: H40, H21, R31, R21

Suggested Citation

Brasington, David M., Capitalization and Community Size. Available at SSRN: https://ssrn.com/abstract=437581

David M. Brasington (Contact Author)

University of Cincinnati - Department of Economics ( email )

Carl H. Lindner Hall 2925 Campus Green Drive
PO Box 0371
Cincinnati, OH 45221-0211
United States

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