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Why Do Households Without Children Support Local Public Schools? Linking House Price Capitalization to School Spending

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Submitted By gwendolyn6yeah
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Journal of Urban Economics 65 (2009) 74–90

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Journal of Urban Economics www.elsevier.com/locate/jue Why do households without children support local public schools? Linking house price capitalization to school spending ✩
Christian A.L. Hilber a,b,∗ , Christopher Mayer c,d a London School of Economics, Department of Geography and Environment, Houghton Street, London WC2A 2AE, UK
Spatial Economics Research Centre (SERC), UK
Columbia Business School, Uris Hall #808, 3022 Broadway, New York, NY 10027, USA d NBER, USA b c

a r t i c l e

i n f o

a b s t r a c t

Article history:
Received 19 October 2007
Revised 19 September 2008
Available online 27 September 2008
JEL classification:
H4
H7
I2
R31
Keywords:
Capitalization
Elderly
Land supply
School spending

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 even childless residents to support spending on schools. We identify a proxy for the extent of capitalization—the supply of land available for new development—and show that towns in
Massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock. 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. Our findings support models in which

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