Federal Reserve Releases School Finance Reform Study

Jun 1, 2009

The United States Federal Reserve Board recently released a study examining school finance reform and shifts in property taxes that originated from an unusual New Hampshire case study.

The study, which was conducted by the Fed’s Division of Research & Statistics and Monetary Affairs, is entitled “Fiscal Amenities, School Finance Reform and the Supply Side of the Tiebout Market.”

This study examines whether local governments that provide a high level of public services per tax dollar attract housing capital.  The first portion of the paper examines large shifts in property tax burdens induced by an unusual school finance reform in the State of New Hampshire.  The estimates suggest that, in most of the State, communities with a reduced tax burden experience a large increase in residential construction.  

The second portion of the paper uses a national sample and the variation in education spending levels arising from 1980s-era school finance reforms.  The results confirm the findings from New Hampshire:  fiscal amenities have a significant impact on the location of residential capital and the impact is largest outside of dense, urban areas.  These results have important implications for a host of issues, including the equity and efficiency of local public goods provisions, assessing who bears the burden of local taxation, and land-use issues such as regulation and the location and pace of residential development.

To read the study, click here.


Should you have any questions or comments, please contact Colodny Fass.


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