ECON 151 Lecture Notes - Lecture 32: Equation, Exogeny, Allocative Efficiency
22 Nov 2020
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Document Summary
Charles tiebout 1956, a pure theory of local expenditure, journal of political economy 1956. Musgrave-samuelson theory is correct when public good are produced at the federal level . Yet, if public goods are produced at a local enough level, supply of public good can meet demand; Tax at the local level (property tax), Produce public good as close to the consumers: education, hospitals, roads, police should be provided locally. Citizens who want more public services (schools, hospitals) will move to places with more public services; Housing price will increase in places with public services; Property tax revenue will increase in places with better public services; Housing price is therefore a measure of the willingness to pay for public services (public schools). By providing things locally, you improve the quality of education b/c ppl more willing to pay taxes for it. Parents with high education will move to high property value localities:
