Public Good Provision, Commuting and Local Employment

Freier, Ronny, Simmler, Martin and Wittrock, Christian (2018) Public Good Provision, Commuting and Local Employment. Centre for Business Taxation Working Paper, Oxford.

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This paper assesses the differential impact of the local availability of grammar schools on local employment depending on the openness of a jurisdiction, measured by commuting costs. Commuting costs matter as they influence workers' reservation wage. While the reservation wage depends on public good provision in jurisdictions with high commuting costs, it does not so in jurisdictions with low commuting costs as workers' outside option is to commute and not to move away. We test these predictions using local grammar school closures in East Germany after 2000. In line with the predictions we find that school closures
reduced employment only in jurisdictions with high commuting costs. Reassuringly, house prices responded, however, similar in both types of jurisdictions which rules out that differences in preferences are driving our results.

Item Type: Other Working Paper
Keywords: Centre for Business Taxation, local schools, employment, commuting, house price, working paper
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 03 Jan 2019 14:22
Last Modified: 03 Jan 2019 14:22
Funders: German Research Foundation S12050/1-1 and R1 2491/2-1

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