The effect of state fiscal reform on population heterogeneity
Abstract: This paper tests whether state fiscal policy alters neighborhood income homogeneity. One implication of the Tiebout model is that within-community homogeneity declines as a result of an exogenous decrease in the ability of jurisdictions to set local tax and expenditure levels. The Property tax revolt and the school finance equalization reform of the 1970s and 1980s offer a test of the role of state fiscal reform on aggregate population sorting behavior. The results show that fiscal reform, especially tax and expenditure limitation laws and property tax reform, results in a small but significant decrease in neighborhood income homogeneity.
Keywords: Income; Property tax; Municipal finance;
Provider: Federal Reserve Bank of Chicago
Part of Series: Working Paper Series, Macroeconomic Issues
Publication Date: 1996