Byron Lutz
Senior
Economist
Division of Research and Statistics
Board of Governors of the Federal Reserve System
20th St. and Constitution Ave., NW
Washington, DC 20551
Email: byron.f.lutz_at_frb_._gov
Tel: (202) 452-2983
Fax: (202) 736-1937
Published
Research
· “School Desegregation, School Choice and Changes in Residential Location Patterns by Race”, American Economic Review, December 2011 (with Nathaniel Baum-Snow)
This paper examines the residential location and
school choice responses to the desegregation of large urban public school
districts. We decompose the well
documented decline in white public enrollment following desegregation into
migration to suburban districts and increased private school enrollment and
find that migration was the more prevalent response. Desegregation caused black public enrollment
to increase significantly outside of the South, mostly by slowing
decentralization of black households to the suburbs, and large black private
school enrollment declines in southern districts. Central district school desegregation
generated only a small portion of overall urban population decentralization
between 1960 and 1990.
·
“The End of Court-Ordered
Desegregation”, American Economic
Journal: Economic Policy, May 2011
In the early 1990s,
nearly forty years after Brown v. the Board of Education, three Supreme Court
decisions dramatically altered the legal environment for court-ordered
desegregation. Lower courts have released numerous school districts from their
desegregation plans as a result. Over the same period racial segregation
increased in public schools across the country -- a phenomenon which has been
termed resegregation. Using a unique dataset, this paper finds that dismissal
of a court-ordered desegregation plan results in a gradual, moderate increase
in racial segregation and an increase in black dropout rates and black private
school attendance. The increased dropout rates and private school attendance
are experienced only by districts located outside of the South Census region.
There is no evidence of an effect on white student along any dimension.
· “The Housing Crisis and State and Local Government Tax Revenue: Five Channels”, Regional
Science and Urban Economics, July 2011 (with Raven Molloy and Hui Shan)
State and local government tax revenues
dropped steeply following the most severe housing market contraction since the
Great Depression. We identify five main channels through which the housing market
affects state and local tax revenues: property tax revenues, transfer tax
revenues, sales tax revenues (including a direct effect through construction
materials and an indirect effect through the link between housing wealth and
consumption), and personal income tax revenues. We find that property tax
revenues do not tend to decrease following house price declines. We conclude
that the resilience of property tax receipts is due to significant lags between
market values and assessed values of housing and the tendency of policy makers
to offset declines in the tax base with higher tax rates. The other four
channels have had a relatively modest effect on state tax revenues. We
calculate that these channels jointly reduced tax revenues by $15 billion from 2005
to 2009, which is about 2 percent of total state own-source revenues in 2005.
We conclude that the recent contraction in state and local tax revenues has
been driven primarily by the general economic recession, rather than the
housing market per-se.
·
“Taxation
with Representation: Intergovernmental Grants in a Plebiscite Democracy,” Review of Economics and Statistics, 92(2),
May 2010
Economic
theory predicts that unconditional intergovernmental grant income and private
income are perfectly fungible. Despite this prediction, the literature on
fiscal federalism documents that grant and private income are empirically
non-equivalent. A large scale school finance reform in New Hampshire — the
typical school district experienced a 200 percent increase in grant income —
provides an unusually compelling test of the equivalence prediction. Most
theoretical explanations for non-equivalence focus on mechanisms which produce
public good provision levels which differ from the decisive voter’s
preferences. New Hampshire determines local public goods provision via a form
of direct democracy — a setting which rules out these explanations. In contrast
to the general support in the literature for non-equivalence, the empirical
estimates in this paper suggest that approximately 92 cents per grant dollar
are spent on tax reduction. These results not only document that equivalence
holds in a setting with a strong presumption that public good provision
decisions reflect the preferences of voters, but also directly confirm the
prediction of the seminal work of Bradford and Oates (1971) that lump-sum grant
income is equivalent to a tax reduction. In addition, the paper presents
theoretical arguments that grant income capitalization and heterogeneity in the
marginal propensity to spend on public goods may generate spurious rejections
of the equivalence prediction. The heterogeneity argument is confirmed
empirically. Specifically, the results indicate that lower income communities
spend more of the grant income on education than wealthier communities, a
finding interpreted as revealing that the Engel curve for education is concave.
·
“The
Connection Between House Price Appreciation and Property Tax Revenue” National Tax Journal, LXI, No. 3, Sept. 2008
This paper explores two aspects of the
connection between property tax revenues and house prices. First, I estimate
the elasticity of property tax revenues with respect to house prices. This
elasticity does not necessarily equal 1 as governments may adjust effective tax
rates to offset changes in property values. Second, I examine the timing of the
relationship. Institutional features of the property tax make it unlikely that
changes in house prices will immediately influence tax revenues. The results
suggest that the elasticity eventually equals 0.4 and that it takes three years
for house price changes to impact tax revenues.
·
“State
and Local Finance and the Macroeconomy: The High-Employment Budget and Fiscal
Impetus w/ Glenn Follette and Andrea Kusko, ”National Tax Journal, LXI, No. 3,
Sept. 2008 (with Glenn Follette and Andrea Kusko)
We examine the interplay of the economy
and state and local budgets by developing and examining two measures of fiscal
policy: the high-employment budget and fiscal impetus. We find that a 1
percentage point increase in cyclical GDP results in a 0.1 percentage point
increase in NIPA-based net saving through the automatic response of taxes and
expenditures. State and local budget policies are found to be modestly
procyclical. Stimulus to aggregate demand is about 0.2 percentage point less
following a business cycle peak than it is during the period before the
business cycle peak.
·
“The Impact of
Employer-Provided Health Insurance on Dynamic Employment Transitions”, Journal
of Human Resources, 37(1), Winter 2002: 129-162 (with Donna Gilleskie)
We
estimate the impact of
employer-provided health insurance (EPHI) on the job mobility of males over
time using a dynamic empirical model that accounts for unobserved
heterogeneity. Previous studies of job-lock reach different conclusions about
possible distortions in tabor mobility stemming from an employment-based health
insurance system: a few authors find no evidence of job-lock, although most
find reductions in the mobility of insured workers of between 20 and 40
percent. We use data from the National Longitudinal Survey of Youth which
includes variables describing the health insurance an individual holds, as well
as whether he is offered insurance by his employer. This additional information
allows us to model the latent individual characteristics that are correlated
with the offer of EPHl, the acceptance of EPHI, and employment transitions. Our
results provide an estimate of job-lock unbiased through correlation with
positive job characteristics and individual specific turnover propensity. We
find no evidence of job-lock among married males, and produce small estimates
of job-lock among unmarried males of between 10 and 15 percent.
Working Papers
·
“Fiscal
Policy in the United States: Automatic Stabilizers, Discretionary Fiscal Policy
Actions, and the Economy” Finance and Economics
Discussion Series 2010-43. Washington: Board of
Governors of the Federal Reserve System, 2010 (with Glenn Follette)
We examine the effects of the economy
on the government budget as well as the effects of the budget on the economy.
First, we provide measures of the effects of automatic stabilizers on budget
outcomes at the federal and state and local levels. For the federal government,
the deficit increases about 0.35 percent of GDP for each 1 percentage point
deviation of actual GDP relative to potential GDP. For state and local
governments, the deficit increases by about 0.1 percent of GDP. We then examine
the response of the economy to the automatic stabilizers using the FRB/US model
by comparing the response to aggregate demand shocks under two scenarios: with
the automatic stabilizers in place and without the automatic stabilizers.
Second, we provide measures of discretionary fiscal policy actions at the
federal and state and local levels. We find that federal policy actions are
somewhat counter-cyclical while state and local policy actions have been
somewhat pro-cyclical. Finally, we evaluate the impact of the budget, from both
automatic stabilizers and discretionary actions, on economic activity in 2008
and 2009.
·
“The Effects of School
Desegregation on Crime”, NBER
Working Paper # 15380, Sept. 2009 (w/ Dave Weiner and Jens Ludwig)
One of the most striking features of crime in America is its disproportionate concentration in disadvantaged, racially segregated communities. In this paper we estimate the effects of court-ordered school desegregation on crime by exploiting plausibly random variation in the timing of when these orders go into effect across the set of large urban school districts ever subject to such orders. For black youth, we find that homicide victimization declines by around 25 percent when court orders are implemented and homicide arrests also decline significantly, which seem to be due at least in part to increased schooling attainment. We also find positive spillover effects to other groups, with beneficial changes in homicide involvement for black adults and perhaps whites as well. Our estimates imply that imposition of these court orders in the nation’s largest school districts lowered the homicide rate to black teens and young adults nationwide by around 13 percent, and might account for around one-quarter of the convergence in black-white homicide rates over the period from 1970 to 1980.
·
“Fiscal
Amenities, School Finance Reform and the Supply Side of the Tiebout Market” ”, Finance
and Economics Discussion Series 2009-18. Washington: Board of Governors of the
Federal Reserve System, 2009
This study asks if local governments which provide a high level of public services per tax dollar attract housing capital. The first portion of the paper examines large shifts in property tax burdens induced by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a large increase in residential construction. In the area of the state near the region's primary urban center (Boston), however, the shock clears through a price adjustment -- i.e. by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. Furthermore, the shock induced communities with a lowered tax burden to enact more stringent land use regulations. The second portion of the paper uses a national sample and exploits variation in education spending levels arising from 1980s era school finance reforms. The results confirm the findings from New Hampshire -- fiscal amenities have a significant impact on the location of residential capital and the impact is largest outside of dense, urban areas. These results, which are interpreted through the lens of a simple theoretical model, have important implications for a host of issues, including the equity and efficiency of local public goods provision, assessing who bears the burden of local taxation, and land use issues such as the location and pace of residential development and the causes of land use regulation.
Research in Progress
·
“Sclerosis of the City: An Empirical
Investigation of Land Assembly” (with Leah Brooks)
·
“The Role of Federal and State Taxes in
Mitigating Wage Inequality” (joint with Daniel
Cooper and Michael Palumbo)