The productivity of schools and other local public goods producers

I construct an agency model of local public goods producers in which households make Tiebout choices among jurisdictions in a world of imperfect information and costly residential mobility. I examine producers’ effort and rent under local property tax finance and centralized finance. I show that, if...

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Bibliographic Details
Published in:Journal of public economics 1999-10, Vol.74 (1), p.1-30
Main Author: Hoxby, Caroline M.
Format: Article
Language:English
Subjects:
Agency
Economic models
Economic theory
Local public goods
Local taxes
Productivity
Property taxes
Public economics
Public finance
Public sector
Regional economics
Schools
Studies
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Summary:I construct an agency model of local public goods producers in which households make Tiebout choices among jurisdictions in a world of imperfect information and costly 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, conventional 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 than 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.
ISSN:0047-2727
1879-2316
DOI:10.1016/S0047-2727(99)00025-0