Capitalization of Fiscal Difference

Capitalization of Fiscal Differences into House Prices
For many individuals,
the decision about where to live is not primarily determined by the level
of local public goods. Indeed, many residents don’t even demonstrate the basic
knowledge of local taxes and spending that is required for the Tiebout mechanism
to operate.14 At the same time, the Tiebout mechanism requires not
that all residents are willing to vote with their feet but that enough residents are
willing to vote with their feet to enforce the optimal provision of public
goods. A town does not have to completely empty out before local officials get
the message that the residents are unhappy with public goods provision; all
that is required is that there be sufficient mobility among an informed minority
in response to public goods decisions.
In fact, very little actual mobility is required for the Tiebout mechanism to
operate because people not only vote with their feet, they also vote with their
pocketbook, in the form of house prices. The Tiebout model predicts that any differences
in the fiscal attractiveness of a town will be capitalized into house
prices. The price of any house reflects the cost (including local property taxes)
and benefits (including local public goods) of living in that house. Thus, towns
that have a relatively high level of public goods, given taxes paid, will have more
expensive housing; conversely, towns that have relatively high property taxes,
given the public goods provided, will have less expensive housing. House therefore represents voting with your pocketbook: people will pay more for a
house in a town that more efficiently delivers local public goods.
There is strong evidence for voting with the pocketbook, as reviewed in the
Empirical Evidence box on the next page.Thus, even if some residents do not
choose their location based on Tiebout factors, enough residents do make
choices that way that it drives the pricing of housing across local communities.

Hasil (Bahasa Indonesia) 1:

Capitalization of Fiscal Differences into House Prices For many individuals,the decision about where to live is not primarily determined by the levelof local public goods. Indeed, many residents don’t even demonstrate the basicknowledge of local taxes and spending that is required for the Tiebout mechanismto operate.14 At the same time, the Tiebout mechanism requires notthat all residents are willing to vote with their feet but that enough residents arewilling to vote with their feet to enforce the optimal provision of publicgoods. A town does not have to completely empty out before local officials getthe message that the residents are unhappy with public goods provision; allthat is required is that there be sufficient mobility among an informed minorityin response to public goods decisions.In fact, very little actual mobility is required for the Tiebout mechanism tooperate because people not only vote with their feet, they also vote with theirpocketbook, in the form of house prices. The Tiebout model predicts that any differencesin the fiscal attractiveness of a town will be capitalized into houseprices. The price of any house reflects the cost (including local property taxes)and benefits (including local public goods) of living in that house. Thus, townsthat have a relatively high level of public goods, given taxes paid, will have moreexpensive housing; conversely, towns that have relatively high property taxes,mengingat barang publik yang disediakan, akan memiliki perumahan yang lebih murah. Rumah karena itu mewakili suara dengan dompet Anda: orang-orang akan membayar lebih untukrumah di sebuah kota yang lebih efisien memberikan barang publik setempat.Ada bukti kuat untuk pemungutan suara dengan dompet, sebagaimana dibahas dalamBukti empiris kotak pada halaman berikutnya. Dengan demikian, bahkan jika beberapa warga tidakmemilih lokasi mereka berdasarkan faktor-faktor Tiebout, penduduk cukup membuatpilihan seperti itu sebagaimana ia mendorong harga perumahan di seluruh masyarakat.