A Further Test of the Tiebout Hypothesis

This study applies a hedonic pricing model to determine whether, in the spirit of Tiebout (1956), Oates (1969), and Tullock (1971), property taxes and other Tiebout-type factors have been capitalized into housing prices in the city of Savannah, Georgia housing market. There were sufficient data in this context to study a total of 2,888 single-family houses for the six-year period 2000-2005; 591 of these houses were located in the Savannah Historic Landmark District. Estimating the model in semi-log form reveals (after allowing for a variety of factors, including 12 spatial variables, four of which are de facto Tiebout-type variables) that the natural log of the real sales price of a single-family house in the city of Savannah environment was in fact negatively affected by the city and county property tax level. In addition, close proximity to public primary, middle, and secondary schools on the one hand and major hospitals on the other hand, which are partly funded with local public revenues, positively impacted real housing prices. Furthermore, there is modest evidence that relatively close proximity to the city’s two public universities positively impacted housing prices. Thus, this study provides yet further evidence of the relevance of the Tiebout (1956)/Tiebout(1956)-Tullock (1971) hypothesis.