Life Cycle Locational Choices, Voting, and Fiscal Federalism: Theory and Estimation

Carnegie Mellon University, Pittsburgh PA

Investigators

Abstract

Objective: Extensive research has established that school quality is a key factor influencing households' choices of where to reside within a metropolitan area and that housing price premiums prevail for neighborhoods with public schools that have high-achieving students. Research to date has focused largely on comparisons across local municipalities and school districts at a given point in time. Our research will extend this analysis to study how household residential location decisions vary over the life cycle. It is natural to expect that households will prefer locations with good quality public schools when they have school-age children while preferring locations with lower housing prices and lower quality public schools when their children have left school. Household preferences for types of public services can also be expected to change over the life cycle, with young households valuing education and older households placing greater value on social services. Older households may also favor lower taxes in preference to expenditures for education. Our research will study the dynamics of location over the life cycle and the associated potential for a generational divide about local tax and expenditure policies within communities. We have already begun research on this topic. Our proposed work will advance the agenda we have begun. Intellectual merit: First, we will incorporate variation in family size, home ownership, and preferences. Incorporating variation in family size will permit us to contrast life cycle housing consumption and location choices of households with differing numbers of children. Incorporating home ownership will permit study of the extent to which concerns for capital gains and losses induce owner occupants who do not have children ("empty nesters" and young households without children) to support spending for education that increases property values. Incorporating preference variation will permit us to account for factors such as differences in the extent to which attachments to friends, neighbors, and familiar surroundings influence decisions about whether to relocate over the life cycle. Second, we will explore the implications of public provision of different types of goods for voting, household sorting across communities, and life cycle mobility patterns. Third, we will assemble a new data set to study differences in demographic composition across communities, changes in community demographic composition over time, and changes in tax and expenditure patterns. Broader impact: There are a number of policy issues that can be addressed with our proposed research. Important issues in education reform include the study of alternative school choice plans, the effect of expenditure equalization programs, and the competitiveness of large urban school districts. We also plan to evaluate housing market policies such as programs that are aimed at increasing housing ownership among lower income households or relocation subsidies similar to those used in "moving to opportunity" programs. We will study implications of an aging U.S. population for household relocation decisions, the composition of communities, the expenditure patterns of communities, and access to economic opportunities.