Zoning and Property Taxation in a System of Local Governments: Further Analysis
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1.
1 Note that (1) implicitly says that houses have infinite lives.
2.
2 For an analysis of public sector efficiency in a short-run model where capitalisation effects are present, see Brueckner (1979c).
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3 It should be noted that Hamilton is extremely vague regarding the phenomenon of entry of communities. He does not propose
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a specific free entry mechanism such as that introduced above.
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4 Note that this result means that consumption bundles in the original community with q>q* i need not be considered.
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5 Another way of seeing this result is that since community size is irrelevant in the model, the ZOH system could actually be a large group of (optimal) singleton communities. Clearly, since no individual in such a configuration can benefit from creating a new singleton community, the configuration is an equilibrium under free entry.
7.
6 The above example highlights the fact that the model developed in this paper does not specify a public decision mechanism for determining the public good level in a community with a population greater than one. In the model, each resident of a non-singleton community views his public good consumption as exogenously determined. Our interest lies in discovering which community configurations with arbitrarily chosen public good levels are equilibria. For analysis of equilibrium community configurations in a model where majority voting decides public good levels, see Brueckner (1979b).
8.
7 It is easy to see that the results discussed in the text would also emerge if the public good were financed by uniform head taxes instead of by property taxes. With free entry of communities, all equilibria would be Pareto-efficient, while inefficient equilibrium configurations would exist without free entry.
9.
8 In a general formulation for 'congested' public goods, z, public consumption, equals f(G, n), where G measures public output. Inverting f yields G = a(z, n), allowing the per-capita cost of providing a public consumption level of z in a community of size n to be written C(a(z, n))/n, where C is the cost function for output. Note that if z is private, f(G, n) = G/n and a(z, n) = nz. Constant returns then implies C(a(z, n))/n = βnz/n = βz. If z is a pure public good, then z ≡ G and per-capita cost is C(z)/n. In this context, it is interesting to note that empirical results in Brueckner (1979a) show that fire protection is more like a pure public good than a private good.
References
Brueckner, J.K. (1979a). Congested public goods: The case of fire protection . Journal of Public Economics. (Forthcoming).
Brueckner, J.K. (1979b). Equilibrium in a system of communities with local public goods: A diagrammatic exposition. Economics Letters, Vol. 2: 387-393.
Brueckner, J.K. (1979c). Property values, local public expenditure, and economic efficiency. Journal of Public Economics, Vol. 11: 223-245.
Edel, M. and Sclar, E. (1974). Taxes, spending and property values: supply adjustment in a Tiebout-Oates model. Journal of Political Economy, Vol. 82: 941-954.
Hamilton, B. (1975). Zoning and property taxation in a system of local governments. Urban Studies, Vol. 12: 205-211.
Sonstelie, J. and Portney, P. (1978). Profit maximizing communities and the theory of local public expenditure. Journal of Urban Economics, Vol. 5: 263-277.
Tiebout, C. (1956). A pure theory of local expenditures. Journal of Political Economy, Vol. 64: 416-424.
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Article first published: February 1981
Issue published: February 1981
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