TY  - JOUR
AU  - Hoxby,Caroline M.
TI  - The Productivity of Schools and Other Local Public Goods Providers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6911
PY  - 1999
Y2  - January 1999
UR  - http://www.nber.org/papers/w6911
L1  - http://www.nber.org/papers/w6911.pdf
N1  - Author contact info:
Caroline Minter Hoxby
Department of Economics
Stanford University
Landau Building, 579 Serra Mall
Stanford, CA 94305
Tel: 650-725-8719
Fax: 650-725-5702
E-Mail: choxby@stanford.edu
AB  - I construct an agency model of local public goods producers with special reference to public schools.  The model assumes that households make Tiebout choices among jurisdictions, but it has more realistic assumptions about information and the cost of residential mobility.  I examine producers' effort and rent under local property tax finance and centralized finance.  I show that, if there are a sufficient number of jurisdictions to choose among, conventional local property tax finance substantially reduces the agency problem and associated loss of productivity. Specifically, I demonstrate that local property tax finance can attain about as much productivity as a social planner with centralized finance can, even if the social planner is armed with more information that a real social planner could plausibly have. The key insight is that decentralized Tiebout choices make some information the social planner would need verifiable and other information unnecessary.
ER  -