Econometrica: Sep, 1982, Volume 50, Issue 5
Micro-Based Estimates of Demand Functions for Local School Expenditures
Daniel L. Rubinfeld, Perry Shapiro, Theodore C. Bergstrom
We devise and apply a new method for estimating demand for local public goods from survey data. Individuals' responses to questions about whether they want more or less of various public goods are combined with observations of their incomes, tax rates, and of actual spending in their home communities to obtain estimates of demand functions. This estimation technique requires no "median voter" assumptions. Functions estimated in this way can be much richer in detail than estimates obtained from aggregate cross-section studies and allow one to distinguish between the effects of individual characteristics and the effects of the character of one's home jurisdiction on demand. Estimates of the effects of income and price turn out to be quite similar to those found in aggregate studies.