Local policy, income, and housing prices

Göbel, Jürgen (2009): Local policy, income, and housing prices.

Abstract

In a local economy, the citizens can react on local policy by exit. Exit induces a shift in the housing demand. The local policy may thus capitalize into the housing prices. However, the citizens encounter specific coordination problems on the housing market. Therefore, it may be asked how effective their exit option is. To answer this question, we work with a sample of 234 U.S. counties, from 2002 and 2003. Our empirical analysis shows that the property tax revenue is the local fiscal variable which has the strongest connection with the housing prices. In contradiction to the general theory, this connection is positive and indirect. The essential element within this connection is the personal income.

• Item Type: MPRA Paper
• Language: English
• Keywords: local policy; exit; housing price; capitalization
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H72 - State and Local Budget and Expenditures; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand

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