TAKS, taxes and Tiebout in Texas: the relationship between residential sorting and school quality

Abstract

Wallace Oates classic study which provided empirical support for the Tiebout hypothesis has been used as the basis for numerous future attempts to explain residential sorting among local jurisdictions. Oates and many others have focussed on school quality, specifically expenditure per pupil, as a reason for citizen voters' decisions to move. Data from Dallas suburbs seems to provide support for Tiebout's original hypothesis, that people choose a community based on the set of public goods that are provided there, but the expenditure per pupil variable was not significant. Texas school finance policy, which redistributes wealth from wealthier districts to poorer districts, makes the expenditure per pupil variable meaningless. Using a two stage least squares model, this study shows that standardized test scores from the Texas Assessment of Knowledge and Skills (TAKS) test can be substituted as a school quality variable. Results of the study provide additional support for the Tiebout hypothesis in the Dallas, Texas area.