Do People Vote with Their Feet? An Empirical Test of Environmental Gentrification

42 Pages Posted: 17 May 2006 Last revised: 20 Jun 2014

H. Spencer Banzhaf

Georgia State University - Department of Economics; PERC - Property and Environment Research Center; National Bureau of Economic Research (NBER)

Randall P. Walsh

University of Colorado at Boulder - Department of Economics

Date Written: March 1, 2006

Abstract

Tiebout's (1956) suggestion that people "vote with their feet" to find the community that provides their optimal bundle of taxes and public goods has played a central role in the theory of local public finance over the past 50 years. Given the central importance of Tiebout's insights, there have been surprisingly few direct tests of his premise. In this paper, we use a Tiebout equilibrium model to derive testable hypotheses about changes in local community demographics. The model clearly predicts increased population density in neighborhoods that experience an exogenous increase in public goods but yields only tentative predictions about the effect on neighborhood composition. To test these hypotheses, we use a difference-in-difference model to identify the effect of initial pollution levels and changes in local pollution on population and demographic composition. Our results provide strong empirical support for the notion that households "vote with their feet" in response to changes in environmental quality. This result has two implications. First, and most broadly, it provides direct empirical support for the assumptions underlying the Tiebout model. Second, in our particular application, the potential for what we call "environmental gentrification" has important implications both for the analysis of environmental equity and for the design of environmental policies aimed at benefiting the less-advantaged elements of society.

Keywords: Tiebout, gentrification, air quality

JEL Classification: J6, Q5, R2

Suggested Citation

Banzhaf , H. Spencer and Walsh, Randall P., Do People Vote with Their Feet? An Empirical Test of Environmental Gentrification (March 1, 2006). RFF Discussion Paper No. 06-10. Available at SSRN: https://ssrn.com/abstract=901657 or http://dx.doi.org/10.2139/ssrn.901657

H. Spencer Banzhaf (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-413-0252 (Phone)

HOME PAGE: http://www2.gsu.edu/~prchsb/

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Randall P. Walsh

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-4599 (Phone)
303-492-8622 (Fax)

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