NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Schools and Location: Tiebout, Alonso, and Government Policy

Eric A. Hanushek, Kuzey Yilmaz

NBER Working Paper No. 12960
Issued in March 2007
NBER Program(s):   ED   PE

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.

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Document Object Identifier (DOI): 10.3386/w12960

Published: Hanushek, Eric and Kuzey Yilmaz. "The Complementarity of Tiebout and Alonso." Journal of Housing Economics 16, 2 (June 2007): 243-261.

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