Drs. Muth and Mills Meet Dr. Tiebout: Integrating Location-Specific Amenities into Multi-Community Equilibrium Models

This article analyzes and compares two alternative approaches of incorporating location-specific amenities in equilibrium models of local jurisdictions. The first, which we denote the developer model, builds on the classic work of Richard Muth and Edwin Mills. A developer owns all land within the jurisdiction and provides a bundle of housing and local public services. The alternative approach, which we denote the community model, builds on the classic work by Charles Tiebout. Housing and local public services are provided by a competitive market and a local public sector. We show that both modeling approaches can be integrated into a unified framework. Our approach provides new insights into the identification of structural parameters in models with location-specific amenities. We demonstrate that it is possible to recover the underlying structure of the economy without observing housing prices. We then apply our methodology to a large data set from the Boston metropolitan area.

Recommended citation: Epple, D., Gordon, B. R., & Sieg, H. (2010). "Drs. Muth and Mills meet Dr. Tiebout: Integrating Location-Specific Amenities into Multi-Community Equilibrium Models." Journal of Regional Science. 50(1), 381-400.
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