Allocative Inefficiency and Local Government
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J. K. Brueckner (Journal of Public Economics, 19, 311-331, 1992; 11, 223-245, 1979) demonstrated that hedonic estimates of property values can be used to test for allocative efficiency in local Government. However, previous applications of his technique have incorporated data from multiple labor markets, introducing the possibility that governmental amenities might have been capitalized into wages differentials rather than property values. This analysis applies his approach to data from a single metropolitan area. The estimation suggests that local governments do not systematically overprovide any public services and may underprovide highway services. © 1995 Academic Press. All rights reserved.
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