Recognizing the effects of Tiebout in the Commonwealth

Bill Stanley, a Republican state senator from Franklin County, is leading a subcommittee that will look into modernizing Virginia’s public schools. Many of Virginia’s public schools are so old they’re crumbling: in 2016, for instance, a five-pound piece of ceiling tile fell on the head of a fifth grader at George Washington Carver Elementary School. While 52 percent of Virginia’s schools are more than 50 years old, many are brand new. In Arlington, Washington-Lee High School’s newest building is less than a decade old, complete with an aquatics center and sprawling sports fields. Why do we see such startling differences in the quality of school buildings across localities?

These differences reflect the insights of Charles Tiebout’s 1956 model: localities compete for consumer-voters, offering different bundles of public goods and taxes. This competition leads to more efficient matching of localities and consumer-voters than a centralized system could provide. Of course, Tiebout’s model relies on many assumptions that just don’t hold up in the “real world.” People can’t move where ever they want, they can’t do so at no cost, they don’t have perfection information, et cetera. In other words, there’s friction. But there is some strong evidence to suggest that “Tiebout sorting,” or  “the sorting of households into neighborhoods and communities according to their willingness and ability to pay for local public goods,” does occur. In a 1999 paper, Sandra Black compared homes on the boundaries of school districts and found that parents are willing to pay 2.5 percent more for a 5 percent increase in test scores. Maybe the differences in Virginia schools are efficient—imagine two families of equal incomes, but Family A values school quality very little and Family B values school quality a lot. Family A chooses to live in GWC's school district, and Family B chooses to live in Arlington. If Tiebout sorting leads to an efficient distribution of public goods, then efforts to reduce inequality across school districts may reduce efficiency, and could result in other negative effects, as well. For instance, a school finance reform effort in Texas “reduced the spending gap between Texas' property-poor and property-rich districts by $500 per pupil, [but it also] destroyed about $27,000 per pupil in property wealth.” Tiebout teaches us that we must strike a delicate balance between equity and efficiency; as Bill Stanley and the Virginia legislature work to improve schools, they would do well to remember Tiebout’s model and its real-world implications.