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Why do households without children support local public schools? Linking house price capitalization to school spending

Hilber, Christian A. L. and Mayer, Christopher (2004) Why do households without children support local public schools? Linking house price capitalization to school spending. NBER Working Paper series (10804). National Bureau of Economic Research, Cambridge, MA.

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Identification Number: 10.3386/w10804


While residents receive similar benefits from many local government programs, only about one-third of all households have children in public schools. We argue that capitalization of school spending into house prices can encourage residents to support spending on schools, even if the residents themselves will never have children in schools. We identify a proxy for the extent of capitalization-the supply of land available for new development-and show that in response to a plausibly exogenous spending shock in Massachusetts, towns with little undeveloped land have larger changes in house prices, but smaller changes in quantity (construction). Towns with little available land also spend more on schools. We extend these results using data from school districts in 46 states, showing that per pupil spending is positively related to the percentage of developed land. This positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home. These findings support models in which house price capitalization encourages more efficient provision of public services and may explain why some elderly residents support school spending.

Item Type: Monograph (Working Paper)
Official URL:
Additional Information: © 2004 The Authors
Divisions: Geography & Environment
Subjects: H Social Sciences > HV Social pathology. Social and public welfare. Criminology
H Social Sciences > HJ Public Finance
JEL classification: H - Public Economics > H4 - Publicly Provided Goods
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations
I - Health, Education, and Welfare > I2 - Education
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Date Deposited: 23 Jul 2008 12:41
Last Modified: 15 Sep 2023 23:08

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