Voluntary income clustering and the demand for housing and local public goods

Economists have suggested that wealthy communities use “fiscal zoning” in order to protect their tax bases. Such zoning would be unnecessary if tastes for local public goods were sufficiently correlated with tastes for the taxed good, residential property. The common notion of “bid rent” can be extended to derive a formula to show under what conditions fiscal zoning is redundant. Our information about the values of the relevant parameters is not sufficiently precise, however, to determine whether these conditions are met.     

Local public goods, property values, and local public choice

This paper examines the relationship between the benefits and costs of local public good provision and local property values within the context of the Koopmans-Beckmann-Gale location-assignment model. Property values do not in general measure accurately the marginal net benefits of local public goods; special conditions sufficient for property values to measure or bound the marginal net benefits are stated, however. In addition, it is shown that under certain circumstances, households vote for property-value-enhancing levels of local expenditures. Under these conditions, a political equilibrium produces a Lindahl solution to the local public good problem.     

Green Online vs Green Offline preferences on local public goods trade-offs and house prices

This paper focuses on the relationship between (i) house prices and (ii) local green public goods. The main objective of the paper is to analyse a specific house-pricing mechanism which reflects the utility of being Green Offline, i.e. having access to green areas, versus the utility derived from the ability to be Green Online. The focus will be on data from European Union countries, and in particular Germany. Our results show that on an aggregate level for the EU there appears to be a clear indication for an irrational house-pricing mechanism, ignoring the negative trade-off effect from Green Online and Green Offline public investments (goods and assets). Meanwhile, on an individual level, for the case of Germany, more detailed bounded rationality effects of fashion-driven supply on house pricing are observed, positively related to Green Online values but negatively related to high Green Offline preferences. In conclusion, we find that house prices throughout Europe do not reflect a rational social change in green preferences, but tend to irrationally overprice Green Online values, which may create instability on the local housing market in the long run.     

Long-term effects of public low-income housing vouchers on neighborhood quality and household composition

In this paper we estimate the effect of housing voucher receipt on the composition of recipient households and the quality of the neighborhoods in which recipient households reside. Drawing on a dataset that contains extensive information on a large and diverse panel of low-income families for up to 5 years following voucher receipt, we isolate the effects of voucher receipt using propensity score matching techniques together with regression adjustment. Full-sample results show voucher receipt to have little effect on neighborhood quality in the short-term, but some positive long-term effects. We also find that voucher receipt is tied to a higher probability of change in household composition in the year of voucher receipt, but greater stability in subsequent years. Our large sample allows us to explore differential responses of geographic and socioeconomic subgroups. Our findings have several implications for both research and policy.     

Voluntary contributions and local public goods in a federation

This paper considers nonneutral effects of government spending in a federation of multiple jurisdictions. Both government spending and private donations finance local public goods, redistributive programs, that provide transfers for the poor. In the standard model, government spending has no effect on the public goods, as donors reduce their donations one for one in response to an increase in government spending. In a federation, donors of a jurisdiction donate, through federal charities, to help the poor in the jurisdiction and the poor in other jurisdictions as well. Jurisdictions are thus linked through donations. Such linkage influences donors' behavior beyond the traditional crowding-out effect. As a result, government spending has nonneutral effects on the level of public goods.     

Voice,exit and local capture in public provision of private goods

We developed a simple model on publicly provided private goods, such as health or education that highlights a vicious cycle faced by many developing countries. When public services are not of high quality due to mismanagement or corruption, the wealthy may switch to private alternatives. Their exit weakens the influence of citizen voice over politicians, since that leaves the poor as the only constituent with a stake in good governance. As the civic control over local governments weakens, government’s concern for social welfare declines even further, leading to more corruption and more corrosion in the quality of public services. Our model shows that establishing institutions (such as local taxation) that spread the costs and benefits of governance across the whole society is crucial for the success of local governments. Empirical results from the Philippines support this hypothesis.     

Pigou, Tiebout, property taxation, and the underprovision of local public goods

Pigou's proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper. A simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services. The case where public services are an intermediate producer good is also considered.     

Congestible public goods and local indeterminacy: A two-sector endogenous growth model

This paper shows that the congestible public goods can generate local indeterminacy in a two-sector, constant-return human capital enhanced growth model. While the productive public good exerts positive sector-specific externalities, the congestion effect generates negative aggregate externalities. The sector-specific externalities alone arising from productive public goods cannot establish local indeterminacy without the combination of negative externality in a model with social constant return technology. Congestible public good generates local indeterminacy if the degree of productive public good externality and the degree of congestion effect are large enough. The condition for indeterminacy is independent of the factor intensity rankings. The conditions are quantitatively assessed and the required parameter values for the degrees of public good externality and congestion are consistent with the estimated values in existing literature.     

Spatial equilibrium with local public goods: Urban land rent,optimal city size and the Tiebout hypothesis

This paper extends the standard model of urban land rent to consider the spatial equilibrium conditions in a local public goods market as hypothesized by Charles M. Tiebout. An analysis is made of the spatial dimensions of public goods, their degree of ‘localness’ and their impact on land values. It is shown that the optimal population size of the community (Tiebout's sixth assumption) is simultaneously derived with the optimal supply of local public goods and local taxes. It is also shown that land rent is a poor output indicator of Tiebout's equilibrium conditions and that the capitalization assumption is not the appropriate test for his hypothesis.     

The end of public housing as we know it: public housing policy,labor regulation and the US city

In this article I argue that the US public housing policy, as codified by the Quality Housing and Work Responsibility Act of 1998 (QHWRA), is helping to reconfigure the racial and class structure of many inner cities. By promoting the demolition of public housing projects and replacement with mixed‐income housing developments, public housing policy is producing a gentrified inner‐city landscape designed to attract middle and upper‐class people back to the inner city. The goals of public housing policy are also broadly consonant with those of welfare reform wherein the ‘workfare’ system helps to bolster and produce the emergence of contingent low‐wage urban labor markets. In a similar manner, I argue that public housing demonstration programs, such as the ‘Welfare‐to‐Work’ initiative, encourage public housing residents to join the lowwage labor market. Although the rhetoric surrounding the demolition of public housing emphasizes the economic opportunities made available by residential mobility, I argue that former public housing residents are simply being relocated into private housing within urban ghettos. Such a spatial fix to the problems of unemployment and poverty will not solve the problems of inner‐city poverty. Will it take another round of urban riots before we seriously address the legacy of racism and discrimination that has shaped the US city? Cet article démontre que la politique du logement public américaine, telle que la réglemente la Loi de 1998, Quality Housing and Work Responsibility Act, contribue à remodeler la structure par races et classes de nombreux quartiers déshérités des centres‐villes. En favorisant la démolition d'ensembles de logements sociaux et leur remplacement par des complexes urbanisés à loyers variés, la politique publique génère un embourgeoisement des centres‐villes destinéà y ramener les classes moyennes et supérieures. Les objectifs de la politique du logement rejoignent largement ceux de la réforme sociale où le système de ‘l'allocation conditionnelle’ facilite et nourrit la création de marchés contingents du travail à bas salaires. De même, les programmes expérimentaux de logements publics, telle l'initiative Welfare‐to‐Work (De l'aide sociale au travail) poussent les habitants des logements sociaux à rejoindre le marchéde la main d'?uvre à bas salaires. Bien que les discours autour de la démolition des logements sociaux mettent en avant les ouvertures économiques créées par la mobilité résidentielle, leurs anciens habitants sont simplement en train d'être déplacés vers des logements privés situés dans des ghettos urbains. Ce genre de solution spatiale aux problèmes du chômage et de la pauvreté ne viendra pas à bout du dénuement des quartiers déshérités du centre. Faudra‐t‐il une autre série d'émeutes urbaines pour que l'on aborde sérieusement l'héritage de racisme et de discrimination qui a façonné les villes américaines?     

Demand for durable and nondurable goods,environmental policy and consumer welfare

If a tax on energy affects the demand for a nondurable good, the stock of a durable good, and the proportion of the energy consumption per unit of service of the durable good, an integrated approach for investigating consumer demand for durables and nondurables is required. The purpose of this paper is to employ the concept of a variable expenditure function with quasi-fixed durable goods as arguments in order to derive a demand system for nondurable goods in prices of the nondurables, in the stocks of durables, and in variable expenditure. From the envelope condition desired stocks of durables can be calculated and investment demand for durables can be determined. For an application we choose a variable expenditure function based on the almost ideal demand specification, and evaluate alternative environmental policy measures using the equivalent variation for comparing the welfare effects.     

Price and quantity competition among heterogeneous suppliers with two-part pricing: applications to clubs, local public goods, networks, and growth controls

Models of club goods, local public goods, and growth controls appear to have theoretical structures distinct from usual oligopoly models. This article shows, however, that they are special cases of a generalized oligopoly model that incorporates the possibility of two-part pricing and externalities between consumers (either congestion or network externalities). Our generalized two-part pricing model not only serves as a synthesis of a wide range of models but also allows us to obtain several new results on equilibrium prices. Another advantage of our model is that it can be interpreted as a reduced form of more complicated models that have spatial structures. This facilitates extension to the case where firms are heterogeneous and the number of firms is arbitrary.     

Three public goods and lexicographic preferences: replacement principle

Review of Economic Design - We study the problem of locating multiple public goods for a group of agents with single-peaked preferences over an interval. An alternative specifies for each public...     

Two state capital accumulation with heterogenous products: Disruptive vs. non-disruptive goods

The paper considers the problem of a firm that, while producing a standard product, has the option to introduce an innovative product. The innovative product competes with the standard product and will therefore reduce revenues of the standard product. A distinction is made between innovative products that do or do not become even more relatively appealing as their market share grows (e.g., because of network externalities). It is shown that in the former case, which we call a “disruptive” good, history dependent long run equilibria can occur, which are in line with recent real life economic examples.     

Capital structure,investment unanimity,and public goods: the case for social responsibility

This paper examines the concepts of optimal capital structure and investment in an economy where government’s role is the provision of a public good. That public good is financed through current tax revenues and the sale of government securities. Absent such complications, traditional finance theory has established the equivalence among (competitive) value maximization, unanimity, and Pareto optimality. In the setting of this paper, however, the market value of government securities is not determined by the value of public good production, and the correspondence between value maximization, Parto optimality, and unanimity will not generally hold without significant restrictions on the tax structure. Otherwise, value maximization is neither an optimal nor unanimously supported objective for the firm.     

Local public goods and private suppliers: Musical suburbs replayed

This paper deals with the existence of private market suppliers in a standard local public goods model. The result of this modification can be a cycling process instigated by rich households rather than poor households. The theoretical model provides empirical implications for capitalization studies and policy implications for the provision and financing of local public goods including education.     

Composite commodities, housing characteristics and the Hicksian surplus measures of welfare change

The purpose of this paper is to elaborate on previous research that deals with the implications of alternative housing concepts for the estimation of the welfare effects of housing programs. We compare one housing concept, which defines housing in terms of a composite good housing services with an alternative in which housing is treated as a bundle of attributes. We extend the analysis in the literature by concentrating on welfare measures that are applicable to a much broader class of government programs than those that have been discussed before. We focus in the Hicksian surplus measures which are particularly suited to handle structure in which constraints on quantity are impused. In the theoretical sections we rigorously show that the Hicksian surplus measures of welfare change based on the composite good housing services will be biased whenever a housing program imposes restrictions on the consumption of attributes. The direction of the bias depends on the nature of the program. Empirical work confirms the predictions of the theoretical analysis.     

Public goods provision: Unit-by-unit cost-sharing rules and the core

In a simple model of one public good producible from one input, we show that unit-by-unit cost-sharing rules have two properties. First, a unit-by-unit cost-sharing rulealways chooses a core allocation. Second, every allocation in the core will be chosen by at least one unit-by-unit cost-shring rule. We argue that costs should be shared on a unit-by-unit basis. We propose a simple mechanism to implement the family of unit-by-unit rules. Received: 18 May 2005, Accepted: 6 December 2005 JEL Classification: H41, C72, D78 I thank Hervé Moulin for helpful comments and discussions. All errors are mine. Financial support from the Hong Kong Research Grants Council under grant RGC-DAG99/00.BM52 is gratefully acknowledged.