second best property value capitalization abstract a simple model of distortive local finance shows how lump sum finance models are misleading what information local prices contain in the presence of distortions and the feasibility of adjusting observed property value changes to infer resident net benefits of public goods

fdi and taxation a meta study despite the continuing political interest in the usefulness of tax competition and tax coordination as well as the wealth of theoretical analyses it still remains open whether or when tax competition is harmful moreover the influence of tax differentials on multinationals decisions is still insufficiently analyzed thus economists have increasingly resorted to empirical analysis in order to gain insights on the elasticity of fdi with respect to company taxation as a result the empirical literature on taxation and international capital flows has grown to a similar abundance during the last 25 years as the respective theoretical literature its heterogeneity leads to a rising need for concise reviews on the existing empirical evidence in this paper we extend former meta analyses on fdi and taxation in three ways first we add the most recent publications unconsidered in meta analyses up to date second we apply a different methodology by using a broad set of meta regression estimators and explicitly discuss which one is most suitable for application to our meta data third we address some important issues in research on fdi and taxation to the clarification of which meta analysis can make valuable contributions these issues are mainly the influence of variables which might moderate effects of tax differentials e g public spending the implications of using aggregate fdi data as opposed to firm level information on measured tax effects the implications of bilateral effective tax rates and the possible presence of publication bias in primary research

a test for efficiency in the supply of public education this paper devises and applies a statistical test for efficient provision of local public education the test is based on the samuelson condition of equality between the sum of marginal rates of substitution and marginal cost the econometric method is a micro based approach to the estimation of the marginal rate of substitution function this method accounts for possible tiebout bias caused by the fact that individuals may choose their school districts in accordance with their tastes for education

a test of executive behavior in the local public sector this paper provides an empirical framework to test three competing theories regarding the behavior of public executives in the local public sector these alternative theo ries are the public interest median voter and expense preference or surplus maximizing leviathan models this study tests these various theories by determining whether aggregate property values the median value of housing or administra tive expenditures is a more significant determinant of the salary of a representative school executive in connecticut the empirical results lend some support for the expense preference model leviathan model of public executive be havior

property tax limits local fiscal behavior and property values evidence from massachusetts under proposition abstract this paper examines the impact of a specific property tax limit proposition 2 1 2 in massachusetts on the fiscal behavior of cities and towns in massachusetts and the capitalization of that behavior into property values proposition 2 1 2 places a cap on the effective property tax rate at 2 5 and limits nominal annual growth in property tax revenues to 2 5 unless residents pass a referendum allowing a greater increase the study analyzes the 1990 1994 period a time when massachusetts municipalities faced significant fiscal stress because of a 30 cut in real state aid and a demographically driven increase in school enrollments the findings include the following 1 proposition 2 1 2 significantly constrained local spending in some communities with most of its impact on school spending 2 constrained communities realized gains in property values to the degree that they were able to increase school spending despite the limitation and 3 changes in non school spending had little impact on property values

why do households without children support local public schools linking house price capitalization to school spending while residents receive similar benefits from many local government programs only about one third of all households have children in public schools we argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools we identify a proxy for the extent of capitalization the supply of land available for new development and show that towns in massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock towns with little available land also spend more on schools we extend these results using data from school districts in 46 states showing that per pupil spending is positively related to the percentage of developed land this positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending

jurisdictional homogeneity and the tiebout hypothesis abstract in this paper an alternative to the capitalization approach to testing the tiebout model is presented the tiebout foot voting mechanism suggests that households will sort and stratify into approximately homogeneous local public goods jurisdictions at a point in time the efficiency of the sort will be positively related to the number of existing jurisdictions using a measure of homogeneity introduced by theil the relationship between stratification homogeneity within jurisdiction and number of jurisdictions is tested for a sample of school districts within 33 smsas the tiebout stratification hypothesis is confirmed

influences on software piracy evidence from the various united states abstract examining socio economic influences on software piracy in the united states we find a negative relationship between software piracy and income tax burdens and economic freedom a 1 increase in per capita income correlates with a 0 25 reduction in piracy

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide a comprehensive empirical analysis of majority rule and tiebout sorting within a system of local jurisdictions the idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice the estimator controls for observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and the potential endogeneity of prices and expenditures as well as the self selection of households into communities of their choice we estimate the structural parameters of the model using data from the boston metropolitan area the empirical findings reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

price specification and the demand for public goods abstract nearly all public expenditure demand studies define the marginal price for publicly provided goods as the household s share of the local property tax burden or what is often called the tax price such a definition is at odds with two familiar facts taxes are ordinarily distortionary and property values are often influenced by the value of local services this paper constructs a theoretically consistent marginal tax price measure incorporating these considerations the new measure demonstrates that previous estimates of the price and income elasticities of demand for public services are biased except under very restrictive circumstances moreover the direction of this bias will depend upon the actual incidence of public spending and the tenure status of residents

property value maximization and public sector efficiency abstract this paper analyses the efficiency implications of property value maximization communities are open so that utilities are parametric to housing producers and the local government each local government chooses its public good output to maximize aggregate property value in the community ignoring feedback effects on the composition of the housing stock it is shown that this type of government behavior generates an equilibrium in which all communities are internally pareto efficient

leviathan in the crosshairs following in the spirit of the leviathan hypothesis this paper empirically examines how the degree of local government market power influences efficiency in the local public sector market power is measured by the number and relative size distribution of similar government units in the same market area to avoid confusing market power with the comparative efficiency or superiority of larger sized organizations the relative size distribution of the individual government unit is held constant in the empirical analysis in the empirical test aggregate property values serve as the measure of efficiency the empirical results suggest that aggregate property values are lower and thus efficiency suffers in more concentrated municipal market areas ceteris paribus thus providing some evidence for leviathan type governments in connecticut

evaluating the social optimality of durable public good provision using the housing price response to public investment recent empirical work in public finance uses the housing price response to public investment to assess the efficiency of local durable public good provision this paper explores the theoretical justification for this technique it points out that the logic justifying the technique for evaluating non durable public good provision does not translate to the durable case a model in which investment is determined by the interaction between a budget maximizing bureaucrat and a community s residents is used to demonstrate that the technique can falsely predict under provision falsely predict over provision or perform without error

a test for allocative efficiency in the local public sector abstract this paper develops a test for pareto efficiency in the local public sectorusing the analytical result that aggregate property value is maximized at the public output level which satisfies the samuelson condition for efficiency by using cross section data it is possible to deduce whether a representative community provides its public goods in a property value maximizing and hence efficient fashion the empirical results show no systematic tendency to either under or over provide public goods in a sample of massachusetts communities

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

property taxes and property values evidence from proposition 212 abstract we examine the effect of proposition 2 1 2 on revenues and housing prices in massachusetts communities that were initially constrained by the law saw large increases in state aid and the use of fees we use these initial constraints as instruments for changes in other components of revenue while treating the change in the property tax as exogenously determined by proposition 2 1 2 our results strongly suggest that communities that were able to increase their property taxes more rapidly saw greater increases in their housing values in the period following passage of the law

evaluating efficient public good provision theory and evidence from a generalised conditional efficiency model for public libraries abstract provision of most public goods e g health care libraries education police fire protection utilities can be characterized by a two stage production process in the first stage basic inputs e g labor and capital are used to generate service potential e g opening hours materials which is then in the second stage transformed into observed outputs e g school outcomes library circulation crimes solved as final outputs are also affected by demand side factors conflating both production stages likely leads to biased inferences about public productive in efficiency and its determinants hence this paper uses a specially tailored fully non parametric efficiency model allowing for both outlying observations and heterogeneity to analyse efficient public good provision in stage one only we thereby employ a dataset comprising all 290 flemish public libraries our findings suggest that ideological stance of the local government wealth and density of the local population and source of library funding i e local funding versus intergovernmental transfers strongly affect library productive efficiency

city government structure are some institutions undersupplied city councilors have a vested interest in maintaining the local government structure that got them elected this resistance to change may result in non optimal supplies of particular local political institutions as cities and metropolitan areas experience changes in population and diversity using unique data from the state of florida we show that there is an undersupply of cities offering larger council sizes our evidence also suggests that there is no undersupply of cities with the mayor council versus the council manager form of government or cities with at large versus district election methods

urban governance competition and welfare the market mechanism of spatial resource allocation is examined in a system of cities where social welfare depends on city size the competitive dynamics of the system is a product of the interplay between people s individual exit type choices migration and their collective voice type choices urban governance it is shown that the use of efficiency enhancing measures of urban governance depends on the pressure of exit a necessary condition for dynamic efficiency is that the market equilibrium of migration is non stable which sounds somewhat paradoxical dynamic efficiency is more likely to emerge between initially small cities in which agglomeration economies dominate than between initially large cities in which agglomeration diseconomies dominate the incentives for proper urban governance are somewhat ambiguous in the most relevant case where cities are of asymmetrical size it is therefore important to strengthen the incentives by means of national urban policy

capitalization and community size abstract studies often show taxes and public services capitalized into house prices but no one has tested whether the rate of capitalization depends on community size the theoretical model of w h hoyt 1999 regional science and urban economics 29 155 171 predicts that capitalization occurs but that the rate of capitalization is weaker in large communities hoyt s model is tested empirically using a house price hedonic framework the tax capitalization results are less clear but the school quality and crime results firmly support the model s predictions using both school districts and municipalities to measure communities larger communities weaken the rate of capitalization

assessing the efficiency of local open space provision abstract this paper tests the efficiency of local provision of land conservation i examine how housing prices which capitalize open space amenities and future tax obligations change after municipalities vote on referendums for conservation spending using a dynamic regression discontinuity based on voting outcomes results suggest that average housing prices increase about 0 68 1 12 for every 1000 per household of open space spending authorized which indicates inefficiency and underprovision of conservation i also examine tax capitalization and supply side explanations for estimated capitalization

measuring the property value effects of local land use and preservation referenda this paper examines a massachusetts policy that encourages communities to raise money through referenda for preservation and affordable housing i use difference indifferences fixed effects and quantile regression to compare home prices before and after such referenda in two towns i include covariates representing existing land uses zoning and historic resources to estimate the value of these amenities standard regression techniques indicate weak effects of the referenda while the estimated coefficients on land use and historic preservation confirm that preservation has a positive effect on property values the quantile regression sheds light on some heterogeneity that goes unnoticed in standard regression results

imperfect mobility and local government behaviour in an overlapping generations model abstract this paper reconsiders the implications of land value maximizing local governments in an overlapping generations model with imperfect mobility specifically residents develop an attachment to place or location specific capital once they reside in a town for a single time period the analysis shows that attempts by governments to capture the resulting rents from less mobile individuals create inefficient migration leave all workers worse off in an ex ante sense and place relatively high burdens on those workers who have high migration costs public good levels are also inefficiently chosen

household location and tiebout do families sort according to preferences for locational amenities abstract if households sort efficiently across locations then at a given location families receive the same marginal benefit from the locational amenities we test for such sorting by imposing cross equation restrictions on hedonic regressions that difference away location versus house specific effects estimates are obtained using a unique subset of the american housing survey in which adjacent housing units are grouped together and observed in both 1985 and 1989 rejection of the cross equation restrictions unambiguously implies an inefficient sorting of households in contrast the data support the cross equation restrictions which is a necessary but not sufficient condition for efficient sorting

theories of earnings announcement timing abstract recent empirical research has found that when a firm releases its earnings report earlier than expected its stock price rises on average while if the report is late its stock price declines the analysis here focuses on two alternative explanations for these findings each based on the premise that some firms with unfavorable earnings increase their reported income through earnings management in one case earnings management necessitates a reporting delay while in the other a delay is caused by the manager s desire to first observe other firms earnings both cases lead to market reactions consistent with the empirical findings

edge versus center finding common ground in the capitalization debate abstract a continuing debate questions whether capitalization of taxes and public services into house price occurs the current study argues for an inverse relationship between housing supply elasticity and capitalization rates a sample is split into houses on the interior and edge of the urban area capitalization of schooling and crime occurs everywhere but it is weaker toward the edge of an urban area where housing supply elasticities and developer activity are greater tax results are less robust but the capitalization rates of crime and school quality are roughly twice as strong on the interior than on the urban fringe

using market valuation to assess public school spending abstract we examine whether school expenditures are valued by potential residents and whether the current level of public school provision is inefficient by estimating the effect of state education aid on residential property values we find evidence that overall state aid is valued by potential residents and that school districts do not overspend on education however we find that districts may overspend in areas where residents have fewer schooling options but find no difference in efficiency by the degree of district unionization one interpretation of these results is that increased competition may reduce overspending on public schools in some areas

local government inefficiency and the tiebout hypothesis does competition among municipalities limit local government inefficiency the tiebout hypothesis has in the past thirty years come to refer to a number of different propositions about local public service provision first there is the point initially stressed by tiebout 15 that the mobility of consumer voters results in a market type of solution to public service provision in which people s demands for public services are revealed as they sort themselves among localities according to their tastes for public services second also discussed by tiebout is the proposition that local public services will tend toward efficient provision finally there is the claim that the mobility of consumers and the competition among the localities for these consumers make politics relatively unimportant in determining local public service provision the bulk of the empirical work on the tiebout hypothesis has attempted to determine if as tiebout suggested local public services are efficiently provided the most common approach has been to estimate the effects of public service provision and tax policy on property values and determine if a balanced budget change in the tax rate changes property values if not then property values are being maximized with respect to public services and public services therefore are efficiently provided studies using this technique include those by oates brueckner and sonstelie and portney 11 1 2 13 these empirical studies while providing evidence about whether or not public services are provided efficiently do not suggest the reasons why local public services are or are not efficiently provided are the limits on inefficiency in the local public sector attributable to local politics or are they the result of the constraints imposed on local governments because of the mobility of residents and capital evidence that local public services are efficiently provided cannot be considered support for the contention that the mobility of people and capital are the factors responsible for this efficiency romer and rosenthal 12 for example provides evidence from

paving streets for the poor experimental analysis of infrastructure effects abstract we provide the first experimental estimation of the effects of the supply of publicly financed urban infrastructure on property values using random allocation of first time street asphalting of residential streets located in peripheral neighborhoods in mexico we show that within two years of the intervention households are able to transform their increased property wealth into significantly larger rates of vehicle ownership household appliances and home improvements increased consumption is made possible by both credit use and less saving a cost benefit analysis indicates that the valuation of street asphalting as capitalized into property values is about as large as construction costs

bureaucratic choice and nonoptimal provision of public goods theory and evidence local governments allocation decisions are modeled in the context of a slack maximizing bureaucrat who produces public goods according to a production function that includes both provision and the constituents socio economic characteristics to gain a better understanding of the determinants of slack comparative statics and an empirical study of illinois municipalities are conducted the indirect output distance function provides efficiency scores upon which we regress several variables representing socio economic characteristics costs and competition measures we find that slack or inefficient behavior is associated with richer communities lower education levels and a lack of competition for residents among municipalities

fiscal pressure tax competition and the adoption of tax increment financing tax increment financing tif has been widely adopted as an economic development tool by municipalities this study estimates a structural probit model of municipal tif adoption decisions using data drawn from cities in indiana it provides empirical evidence that factors such as fiscal pressures tax competition economic distress industrial composition availability of alternative programmes and the expected gains in property values from the use of tif exert significant influence in a city s decision to adopt a tif programme after using an accurate measure of prior growth this analysis finds no empirical evidence to support the contention that growing cities are more likely to adopt tif