Property Taxation, Zoning, and Efficiency in a Dynamic Tiebout Model
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Abstract
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.Citation
Barseghyan, Levon, and Stephen Coate. 2016. "Property Taxation, Zoning, and Efficiency in a Dynamic Tiebout Model." American Economic Journal: Economic Policy, 8 (3): 1-38. DOI: 10.1257/pol.20150050Additional Materials
JEL Classification
- H71 State and Local Taxation, Subsidies, and Revenue
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- R52 Regional Government Analysis: Land Use and Other Regulations
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