Do school districts affect home prices? True to Tiebout's model, many economists have found that home buyers are often willing to pay a premium to live in districts with the "right" schools. High quality public schools may signal everything home buyers want for their children: safe learning environments, positive peer effects, fewer delinquents, etc.
What if a locality's revenue-expenditure patterns perfectly satisfy a home buyer's preferences in everything but public education? Private suppliers would meet unmet demand, and home buyers that value high quality education would send their child to a private school.
However, if school districts do affect home prices, the consumer of the public good is not the customer. This means there is no way for the citizen-voter (parent-customer) to have full information on the quality of the public good - only the child-consumer does after having attended the school. (Of course, this is addressed in the model's assumptions.) This also means that consumer preferences may not be taken into account when the customer-parent is voting with their feet. (Though Friedman would probably say that the child-consumer is not yet a responsible individual so paternalism is necessary).
Regardless, this typical Tiebout model application tells us a lot about the benefits of locally-provided public goods. Oh the choices!
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