We examine the effect of community zoning regulations on allocations and welfare in a two-community model. Individuals choose in which community to live and each community levies a tax, chosen via majority vote, on local property to finance local public education. We study both exogenously specified and endogenously chosen zoning regulations. In equilibrium, the two communities are stratified by income. Theoretical analysis indicates that a number of outcomes are possible. Several interesting results emerge: Zoning tends to make the richer community more exclusive, but the gap between education expenditures may decrease. Moreover, welfare effects are not monotone in income.
ASJC Scopus subject areas
- Economics and Econometrics