Aggregation bias in estimates of demand for local services: Empirical evidence
- 21 Downloads
Studies of demand for local public services have long been of interest for the value they can have for state and local public finance policy. While both macro and micro studies of these demands are common, most of these evidences are derived from macro studies based on the median-voter model. Specification error arising from a median aggregation can be quite significant. This paper finds a substantial difference in the coefficients on property tax prices and education service resulting from aggregated data compared with those from their micro data. These findings are important for the allocation and design of local budgets and state programs for intergovernmental revenue sharing.
KeywordsPublic Service International Economic Public Finance State Program Aggregate Data
Unable to display preview. Download preview PDF.
- Bloom, H. S.; Ladd, H. F.; Yinger, J. "Are Property Taxes Capitalized into House Values?," in G. R. Zodrow, ed.,Local Provision of Public Services: The Tiebout Model after Twenty-Five Years, New York, NY: Academic Press, 1983.Google Scholar
- Hausman, J. "Specification Tests in Econometrics,"Econometrica, 46, 1978, pp. 1251–71.Google Scholar
- Johnston, J.Econometrics Methods, New York, NY: McGraw-Hill, 1982.Google Scholar
- Ladd, H. F.; Christopherson, C. "Demand for Local Public Services Evidence from Survey Data," mimeo, Harvard Univrsity, 1983.Google Scholar
- White, H. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity,"Econometrica, 48, 1980, pp. 817–38.Google Scholar