Extensive research has established that school quality is a key factor influencing households' choices of where to reside within a metropolitan area and that housing price premiums prevail for neighborhoods with public schools that have high-achieving students. Research to date has focused largely on comparisons across local municipalities and school districts at a given point in time. Our research will extend this analysis to study how household residential location decisions vary over the life cycle. It is natural to expect that households will prefer locations with good quality public schools when they have school-age children while preferring locations with lower housing prices and lower quality public schools when their children have left school. Household preferences for types of public services can also be expected to change over the life cycle, with young households valuing education and older households placing greater value on social services. Older households may also favor lower taxes in preference to expenditures for education. Our research will study the dynamics of location over the life cycle and the associated potential for a generational divide about local tax and expenditure policies within communities. We have already begun research on this topic. Our proposed work will advance the agenda we have begun.
Intellectual merit: First, we will incorporate variation in family size, home ownership, and preferences. Incorporating variation in family size will permit us to contrast life cycle housing consumption and location choices of households with differing numbers of children. Incorporating home ownership will permit study of the extent to which concerns for capital gains and losses induce owner occupants who do not have children ("empty nesters" and young households without children) to support spending for education that increases property values. Incorporating preference variation will permit us to account for factors such as differences in the extent to which attachments to friends, neighbors, and familiar surroundings influence decisions about whether to relocate over the life cycle. Second, we will explore the implications of public provision of different types of goods for voting, household sorting across communities, and life cycle mobility patterns. Third, we will assemble a new data set to study differences in demographic composition across communities, changes in community demographic composition over time, and changes in tax and expenditure patterns.
Broader impact: There are a number of policy issues that can be addressed with our proposed research. Important issues in education reform include the study of alternative school choice plans, the effect of expenditure equalization programs, and the competitiveness of large urban school districts. We also plan to evaluate housing market policies such as programs that are aimed at increasing housing ownership among lower income households or relocation subsidies similar to those used in "moving to opportunity" programs. We will study implications of an aging U.S. population for household relocation decisions, the composition of communities, the expenditure patterns of communities, and access to economic opportunities.
Normal 0 false false false EN-US X-NONE X-NONE Metropolitan areas in the United States typically have a large number of local governmental jurisdictions. It is now well established that households "vote with their feet" by choosing the local jurisdiction that best serves their preferences with respect to locally provided public goods. For example, higher income households are typically willing to pay a higher housing price premium to obtain access for their children to school districts that are perceived to provide high quality education. This gives rise to the widely observed stratification by income across city and suburbs in US metropolitan areas. This project investigates the consequences of the decentralized provision of local public goods and services and the associated stratification by income and demographic characteristics. One part of this project investigates how household location decisions vary over the lifecycle, and the implications of these location decisions for political support for taxes to support expenditures on public education. Households sort based on age because preferences for local public education are largely determined by the presence of school-age children in the household. Younger households with school-age children have incentives to pay a premium for housing to locate where educational quality is high and to vote for high levels of educational expenditures. In contrast, older households whose children have graduated from high school have an incentive to relocate to avoid continued payment of the housing price premium for education, and they have an incentive to vote for lower school taxes. The resulting age stratification of households across school districts results in systematic differences in political support for education across local jurisdictions. We establish that there is indeed relocation over the life cycle using migration data from the 2000 Census. We next develop an overlapping generations’ model for households in a system of multiple jurisdictions to capture differences in preferred policies of households over the life-cycle. The model demonstrates how observed inequality in educational policies across communities is influenced not only by stratification by income, but also by the stratification by age. While older households tend to favor lower spending, older households without children create a positive fiscal externality because their presence in a community creates a larger tax base per student. This positive tax externality arising from the presence of older households can dominate the negative effects that arise because older households tend to vote for lower expenditures. We show that, as a consequence of the fiscal externality, sorting by age can reduce the inequality in educational outcomes that is driven by income sorting. This paper was been published as the lead article in the April 2012 issue of the Journal of Public Economics. Another contribution of our research is investigation of agglomeration externalities and the dynamics of firm location choices. Dr. Jeff Brinkman (supported as a PhD student by this NSF grant) Prof. Daniele Coen-Pirani, and Co-PI Holger Sieg develop a new dynamic general equilibrium model of firm location choices. The objective is to understand the observed sorting of firms by productivity in a framework that and is consistent with the observed entry, exit, and relocation decisions of firms within an urban economy. The model is estimated using data collected by Dunn and Bradstreet for the Pittsburgh metropolitan area. In collaboration with Prof. Stephen Calabrese, Co-PI’s Epple and Romano investigate the potential inefficiencies that arise from political and fiscal decentralization in US metropolitan areas. Such inefficiencies arise because housing prices serve two roles in US local jurisdictions. Housing prices ration access to housing, and differences in price premia for housing across jurisdictions ration access to those jurisdictions. The research examines theoretically and quantitatively the social welfare effects of decentralized provision of local public goods as compared to uniform centralized provision. Decentralized provision has the potential to improve social efficiency by permitting households with differing incomes and preferences to obtain their preferred levels of local public goods. Our results suggest, however, that the high degree of decentralization observed in US metropolitan areas fails to achieve the potential benefits of decentralization because the distortion in housing markets arising from the dual role of housing prices more than offsets the benefits of decentralization. This contribution is published in a leading economic journal, the Review of Economic Studies. This research led to the publication of a total of seven papers to date, and to the writing of three working papers. Results of this research were disseminated in more than 30 conference and seminar presentations in the US, as well as Canada, France, Germany, and Spain. Six PhD students participated in research on this project. Four have completed the PhD degree, and have obtained positions in academia, business, and government. Two are progressing well toward completion of the PhD degree. Normal 0 false false false EN-US X-NONE X-NONE
