Are cities as politically polarized as states and countries? “No” is the answer from our regression discontinuity design analysis, which shows that whether the mayor is a Democrat or a Republican does not affect the size of city government, the allocation of local public spending, or crime rates. However, there is a substantial incumbent effect for mayors. We investigate three mechanisms that could account for the striking lack of partisan impact at the local level, and find the most support for Tiebout competition among localities within metropolitan areas.

We provide novel estimates of the location, timing, magnitude, and determinants of the start of the previous U.S. housing boom. The housing cycle cannot be interpreted as a single, national event, as different markets began to boom across a decade-long period, some of them multiple times. A fundamental factor, income of prospective buyers, can account for half of the initial jump in price growth, while expansion of purchases by underrepresented minorities cannot. The start of the boom also was financed conventionally, not by subprime mortgages. The latter's share did rise sharply over time, but only after a multiyear lag.

Examination of detailed geographical information on U.S. housing transactions from 1993 to 2009 find much heterogeneity at the neighborhood level in when the recent boom began, how big the initial jumps in price growth were, how long the booms lasted, and what types of neighborhoods boomed first. There is less neighborhood-level heterogeneity in when the bust began and in aggregate price appreciation during the boom. This heterogeneity suggests that there was no one dominant cause of the boom. We also comment on how very local data may help understand the role of contagion, among other housing market phenomena.

This paper examines racial and ethnic differences in high-cost mortgage lending in seven diverse metropolitan areas from 2004 to 2007. Controlling for credit score and other risk factors, AfricanAmerican and Hispanic borrowers are 103% and 78% more likely to receive high-cost mortgages for home purchases. Alarge part of the increase is attributable to sorting across lenders (55%-65%), and this, in turn, can be largely accounted for by the lender’s ex post foreclosure risk. The remaining within-lender differences are also concentrated in high-risk lenders, revealing the central role of these institutions in explaining market-wide racial and ethnic differences.

We investigate the impact of recent gentrification shocks on minority neighborhoods in the 50 largest US labor markets. We show that household moves from a given neighborhood are concentrated to few destinations with similar minority shares and strong network ties, but those neighborhoods are farther away from downtown. Gentrification affects Black neighborhoods by raising house prices, reducing the proportion of Black households, and increasing the share of movers going to neighborhoods with network ties. However, gentrification has negligible effects on Hispanic neighborhoods. Overall labor market area segregation decreases after a gentrification shock because highly Black neighborhoods become less segregated.

This paper develops a framework for estimating household preferences for school and neighborhood attributes in the presence of sorting. It embeds a boundary discontinuity design in a heterogeneous residential choice model, addressing the endogeneity of school and neighborhood characteristics. The model is estimated using restricted-access Census data from a large metropolitan area, yielding a number of new results. First, households are willing to pay less than 1 percent more in house prices-substantially lower than previous estimates-when the average performance of the local school increases by 5 percent. Second, much of the apparent willingness to pay for more educated and wealthier neighbors is explained by the correlation of these sociodemographic measures with unobserved neighborhood quality. Third, neighborhood race is not capitalized directly into housing prices; instead, the negative correlation of neighborhood percent black and housing prices is due entirely to the fact that blacks live in unobservably lower-quality neighborhoods. Finally, there is considerable heterogeneity in preferences for schools and neighbors, with households preferring to self-segregate on the basis of both race and education.

This paper examines racial and ethnic differences in high-cost mortgage lending in seven diverse metropolitan areas from 2004 to 2007. Controlling for credit score and other risk factors, African American and Hispanic borrowers are 103% and 78% more likely to receive high-cost mortgages for home purchases. A large part of the increase is attributable to sorting across lenders (55%-65%), and this, in turn, can be largely accounted for by the lender’s ex post foreclosure risk. The remaining within-lender differences are also concentrated in high-risk lenders, revealing the central role of these institutions in explaining market-wide racial and ethnic differences. Received December, 17 2014; editorial decision January 20, 2017 by Editor Philip Strahan.

Despite extensive public infrastructure spending, surprisingly little is known about its economic return. In this paper, we estimate the value of school facility investments using housing markets: standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices. Our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins. We extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices, student achievement, and district composition. Our results indicate that California school districts underinvest in school facilities: passing a referendum causes immediate, sizable increases in home prices, implying a willingness to pay on the part of marginal homebuyers of $1.50 or more for each $1 of capital spending. These effects do not appear to be driven by changes in the income or racial composition of homeowners, and the impact on test scores appears to explain only a small portion of the total housing price effect.

The income distribution in many developed countries widened dramatically from 1970 to 2000. Some scholars argue that income inequality contributes to a host of social ills by undermining voters' willingness to support public expenditures. In contrast, we find that growing income inequality is associated with an expansion in government revenues and expenditures on a wide range of services in U.S. municipalities and school districts. Results are robust to a number of model specifications, including instrumental variables that address the endogeneity of the local income distribution. Our results are inconsistent with models predicting that heterogeneous societies provide lower levels of public goods.