Schools and Location: Tiebout, Alonso, and Government Policy

36 Pages Posted: 15 Mar 2007 Last revised: 12 Jul 2007

See all articles by Eric A. Hanushek

Eric A. Hanushek

Stanford University - Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Kuzey Yilmaz

Koc University - Department of Economics

Date Written: March 2007

Abstract

An important element in considering school finance policies is that households are not passive. Instead they respond to policies with a combination of modified residential choice and political choice of tax levels. The highly stylized decision models of most existing analyses, however, lead to conerns about the policy evaluations. In our general equilibrium model of residential location and community choice, households base optimizing decisions on commuting costs, school quality, and land rents. With both centralized and decentralized employment, the resulting equilibrium has heterogeneous communities in terms of income and tastes for schools. This model is used to analyze a series of conventional policy experiments, including school district consolidation, district power utilization, and different equalization devices. The important conclusion is that welfare falls for all families with the restrictions in choice that are implied by these approaches.

Suggested Citation

Hanushek, Eric A. and Yilmaz, Kuzey, Schools and Location: Tiebout, Alonso, and Government Policy (March 2007). NBER Working Paper No. w12960. Available at SSRN: https://ssrn.com/abstract=971596

Eric A. Hanushek (Contact Author)

Stanford University - Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States
650-736-0942 (Phone)
650-723-1687 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Kuzey Yilmaz

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910, Istanbul
Turkey

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