The Productivity of Schools and Other Local Public Goods Providers

Caroline Hoxby

No 6911, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I construct an agency model of local public goods producers with special reference to public schools. The model assumes that households make Tiebout choices among jurisdictions, but it has more realistic assumptions about information and the cost of residential mobility. I examine producers' effort and rent under local property tax finance and centralized finance. I show that, if there are a sufficient number of jurisdictions to choose among, conventional local property tax finance substantially reduces the agency problem and associated loss of productivity. Specifically, I demonstrate that local property tax finance can attain about as much productivity as a social planner with centralized finance can, even if the social planner is armed with more information that a real social planner could plausibly have. The key insight is that decentralized Tiebout choices make some information the social planner would need verifiable and other information unnecessary.

JEL-codes: H70 I22 (search for similar items in EconPapers)
Date: 1999-01
New Economics Papers: this item is included in nep-mic
Note: PE
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Citations: View citations in EconPapers (35)

Published as Journal of Public Economics (1999).

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