On the Political Economy of Land Value Capitalization and Local Public Sector Rent-Seeking in a Tiebout Model

Joseph Gyourko and Joseph Tracy

No 1919, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we examine the political economy. of capitalization in a Tiebout model when there is a rent-seeking public bureaucracy. A new approach is suggested for testing for the influence of successful local public sector rent-seeking on local property values. We present empirical evidence showing that property values are lower in cities which pay their public sector workers significantly more than similar public sector workers earn in other cities. Finally, we discuss how the regulatory process can be used to distribute rents arising from a short-run Tiebout disequilibrium to landowners, public sector workers, and renters.

Date: 1986-05
Note: PE
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Published as Journal of Urban Economics, 1989, vol. 26, pp. 152-173.

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Journal Article: On the political economy of land value capitalization and local public sector rent seeking in a Tiebout model (1989)
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