Schools and Location: Tiebout, Alonso, and Governmental Finance Policy


  • We benefitted from comments and suggestions by Dennis Epple, Ken Judd, Charles Leung, Lance Lochner, Sinan Sarpca, Michael Wolkoff, two anonymous referees, and participants at several conferences. This research was funded by a grant from the Packard Humanities Institute.


Many discussions of school finance policy fail to consider how households respond to policies that change the attractiveness of different residential locations. We develop a general equilibrium model that incorporates workplace choice, residential choice, and political choice of tax and expenditure levels. Importantly, we consider multiple workplaces, a fundamental feature of today's metropolitan landscape. This basic model permits investigating how accessibility and public goods interact in a metropolitan area. The model is used to analyze two conventional policy initiatives: school district consolidation and district power equalization. The surprising conclusion is that school quality and welfare can fall for all families when these restrictions on choice are introduced.