The Demand for Local Public Goods: The Case of Public School Quality

Abstract

The demand for public school quality is estimated. Unlike previous studies, the price of a unit of public school quality in the demand estimation is measured by both the tax price and the implicit price calculated from a house price hedonic. Identification, endogeneity, and Tiebout bias are addressed. The tax price elasticity of the demand for public schooling is -.17; the implicit price elasticity of demand is -.11. Both estimates are more inelastic than previously reported elasticities. The income elasticity of demand is .32. The positive relationship between constant-quality house price and public school quality is confirmed.