Impact of Property Taxes and Public Education Outlays on Housing Costs: Recent Empirical Evidence

Cebula, Richard (2007): Impact of Property Taxes and Public Education Outlays on Housing Costs: Recent Empirical Evidence. Published in: The Journal of Global Business Issues , Vol. 2, No. 1 (30 April 2008): pp. 47-51.

Abstract

This empirical study investigates the impact of property taxes, public education outlays, and other factors on interstate differentials in the cost of housing. While the literature on geographic cost-of-living differentials is well developed, the literature on geographic cost-of-housing differentials is much less so housing costs consist of the price of housing per se for owners (including maintenance and repairs) or rental payments per se for renters. Relevance of this research is elevated by the fact that the cost of housing is the main driver of cost-of-living differences between states. Ordinary least squares results imply that the cost of housing is positively a function of median family income, miles of shoreline, and the mean January temperature, and negatively a function of toxic waste releases and the presence of right-to-work laws. Finally, it is found that property taxes are capitalized into housing prices, thereby lowering those prices and the overall cost of housing, as it is narrowly defined, whereas there is modest evidence that public education outlays may also be capitalized into housing prices, thereby elevating the cost of house.

• Item Type: MPRA Paper
• Language: English
• Keywords: housing cost; property tax capitalization; education outlay capitalization; income; climate; right-to-work laws
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I22 - Educational Finance ; Financial Aid; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R10 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand

References

Ashby, N.J., (2007). “Economic Freedom and Migration Flow between U.S. States,” Southern Economic Journal, Vol. 73(1), pp. 677-697.

Cebula, R.J. (1978). “An Empirical Note on the Tiebout-Tullock Hypothesis,” Quarterly Journal of Economics, Vol. 92(4), pp. 705-711.

Cebula, R.J. (1980). “An Empirical Note on Determinants of Geographic Living Lost Differential,” Land Economics, Vol. 56(4), pp. 477-481.

Cebula, R.J. (1989). “The Analysis of Geographic Living Cost Differentials: A Brief Empirical Note,” Land Economics, Vol. 65(1), pp. 64-67.

Cebula, R.J. (1993). “The Impact of Living Costs on Geographic Mobility,” Quarterly Review of Economics and Finance, Vol. 33(1), pp. 101-105.

Cebula, R.J. & Alexander, G. (2006). “Determinants of Net Interstate Migration, 2000-2004,” Journal of Regional Analysis and Policy, Vol. 36(2), pp. 116-123.

Cebula, R.J. & Todd, S. (2004). “An Empirical Note on Determinants of Geographic Living-Cost Differentials for Counties in the State of Florida, 2004,” Review of Regional Studies, Vol. 34(1), pp. 112-119.

Cobas, J.A. (1978). “A Method to Estimate BLS Family Budgets for All Standard Metropolitan Statistical Areas,” Social Science Quarterly, Vol. 59(4), pp. 546-552.

Kalenkoski, C.M. & Lacombe, D.J. (2006). “Right-to-Work Laws and Manufacturing Employment: The Importance of Spatial Dependence,” Southern Economic Journal, Vol. 73(2), pp. 402-418.

Kurre, J.A. (2003). “Is the Cost of Living Less in Rural Areas?” International Regional Science Review, Vol. 26(1), pp. 86-116.

McMahon, W.W. (1991). “Geographical Cost of Living Differences: An Update,” AREUEA Journal, Vol. 19(3), pp. 426-450.

Nord, M. (2000). “Does It Cost Less to Live in Rural Areas? Evidence from New Data on Food Security and Hunger,” Rural Sociology, Vol. 65(2), pp. 104-125.

Renas, S. (1978). “The Cost of Living, Labor Market Opportunities, and the Migration Decision,” Annals of Regional Science, Vol. 15(1), pp. 95-104.

Renas, S. (1983). “The Cost of Living, Labor Market Opportunities and the Migration Decision: More on Problems of Specification and Aggregation Bias,” Annals of Regional Science, Vol. 17(1), pp. 98-110.

Tiebout, C.M. (1956). “A Pure Theory of Local Expenditures,” Journal of Political Economy, Vol. 64(2), pp. 416-424.

Tullock, G. (1971). “Public Expenditures as Public Goods,” Journal of Political Economy, Vol. 79(5), pp. 913-918.