Association for Public Policy Analysis & Management

This paper examines a spatial interdependence of innovation and diffusion of a new tax base in the case of parcel tax adoption across California school districts. The adoption of parcel taxes—typically a lump-sum tax per parcel of real properties—has been geographically uneven. In this paper, we answer whether school parcel tax adoption is a process of policy diffusion from learning by examining spatial patterns of adoption. To achieve this goal, we embrace theories of policy diffusion (Shipan and Volden 2012) because we believe that they best explain the geographic concentration of school parcel tax adoption. We hypothesize that spatial interdependence among school districts explains the prevalence of parcel taxes in the Bay Area. For instance, this innovation of revenue raising spreads out faster in the Bay Area because school boards learn from each other and voters easily understand how a parcel tax could affect public school revenues by observing neighboring school districts.

To test the spatial dependence, we will use California school-district level panel data that consists of about 986 school districts from 2008 and 2017. After conducting Lagrange multiplier test of major variables of interest, we attempt to mainly use spatial autoregressive (SAR) models for our analyses to explore and examine the spatial diffusion process. The results demonstrate that the home price cap, per pupil current operating spending, together with the parcel tax adoption in the neighboring school districts are the critical factors affecting the adoption and diffusion of the special purpose tax, parcel tax.This research contributes to the literature by accounting for the spatial effects in the diffusion process of parcel taxes.