THE EFFECTS OF LOCAL TAXES AND PUBLIC SERVICES ON RESIDENTIAL DEVELOPMENT PATTERNS*

ABSTRACT. This paper incorporates an exogenous taxing and service-providing public sector into a dynamic residential land-use model in order to examine how local-government fiscal policies alter the pace and pattern of residential development. The model is used to derive the comparative-dynamic responses to variations in the income, sales, and property taxes and public-service time paths. The results show how tax and expenditure effects systematically depend upon the anticipated relative growth rates in rents to alternative uses and vary across locations within a given urban area as well as across urban areas themselves.