NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

On the Political Economy of Land Value Capitalization and Local Public Sector Rent-Seeking in a Tiebout Model

Joseph Gyourko, Joseph S. Tracy

NBER Working Paper No. 1919
Issued in May 1986
NBER Program(s):   PE

In this paper we examine the political economy. of capitalization in a Tiebout model when there is a rent-seeking public bureaucracy. A new approach is suggested for testing for the influence of successful local public sector rent-seeking on local property values. We present empirical evidence showing that property values are lower in cities which pay their public sector workers significantly more than similar public sector workers earn in other cities. Finally, we discuss how the regulatory process can be used to distribute rents arising from a short-run Tiebout disequilibrium to landowners, public sector workers, and renters.

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Published: Journal of Urban Economics, 1989, vol. 26, pp. 152-173.

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