American Economic Journal: Economic Policy
no. 3, August 2016
This paper presents a dynamic Tiebout model and uses it to revisit a classic argument in public finance. The argument, due to Hamilton (1975), is that a system of governments financing services with property taxes will produce an efficient allocation of housing and services if governments can implement zoning ordinances. In the model, when governments choose zoning along with taxes and services, there does not exist an equilibrium that is both efficient and locally stable. Moreover, there exists an equilibrium in which governments over-zone and households over-consume housing. These findings challenge the Benefit View of the property tax.
Barseghyan, Levon, and Stephen Coate.
"Property Taxation, Zoning, and Efficiency in a Dynamic Tiebout Model."
American Economic Journal: Economic Policy,
State and Local Taxation, Subsidies, and Revenue
State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
Regional Government Analysis: Land Use and Other Regulations