Full Citation
Title: Costly Centralization: Evidence from Community College Expansions
Citation Type: Working Paper
Publication Year: 2021
ISBN:
ISSN:
DOI:
NSFID:
PMCID:
PMID:
Abstract: Centralization of public goods with spillovers limits free-riding and increases provision, but general equilibrium household responses to changes in net benefits across space can undermine its value. This paper considers the trade-off for community colleges. After geographic expansions across Texas, communities that joined and their neighbors saw increased aggregate home values and prices, suggesting that more centralization is welfare-enhancing. I estimate a general equilibrium structural model to understand the optimal size of the tax base in Austin, TX. Under centralization, 12 percent more households pay college taxes and average yearly household welfare increases by $29 ($23M for the MSA), or 15 percent of the college’s yearly tax revenue. However, complete centralization is not socially optimal because the services are spatially concentrated, and the resulting household sorting adversely affects the housing market. There are 146 tax base configurations that improve welfare even more; a smaller than centralization tax base raises average welfare by up to an additional $222, mainly reflecting the general equilibrium housing market effects.
User Submitted?: No
Authors: Simon, Andrew
Series Title:
Publication Number:
Institution: University of Michigan
Pages: 1-62
Publisher Location: Ann Arbor
Data Collections: IPUMS USA
Topics: Education
Countries: