TY  - JOUR
AU  - Bayer,Patrick
AU  - Ferreira,Fernando
AU  - McMillan,Robert
TI  - Tiebout Sorting, Social Multipliers and the Demand for School Quality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10871
PY  - 2004
Y2  - November 2004
UR  - http://www.nber.org/papers/w10871
L1  - http://www.nber.org/papers/w10871.pdf
N1  - Author contact info:
Patrick Bayer
Department of Economics
Duke University
213 Social Sciences
Durham, NC 27708
Tel: 919/660-1832
E-Mail: patrick.bayer@duke.edu

Fernando Ferreira
The Wharton School
University of Pennsylvania
1461 Steinberg - Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
Tel: 215/898-7181
Fax: 215/573-2220
E-Mail: fferreir@wharton.upenn.edu

Robert McMillan
University of Toronto
Department of Economics
150 St. George Street
Toronto, ON M5S 3G7
CANADA
Tel: 416/978-4190
Fax: 416/978-6713
E-Mail: mcmillan@chass.utoronto.ca
AB  - In many theoretical public finance models, school quality plays a central role as a determinant of household location choices and in turn, of neighborhood stratification. In contrast, the recent empirical literature has almost universally concluded that the direct effect of school quality on housing demand is weak, a conclusion that is robust across a variety of research designs. Using an equilibrium model of residential sorting, this paper closes the gap between these literatures, providing clear evidence that the full effect of school quality on residential sorting is significantly larger than the direct effect  -- four times as great for education stratification, twice for income stratification. This is due to a strong social multiplier associated with heterogeneous preferences for peers and neighbors; initial changes in school quality set in motion a process of re-sorting on the basis of neighborhood characteristics that reinforces itself, giving rise to substantially larger stratification effects.
ER  -