20.10 * Business and Policy Application: Local Differences in Property Taxes: Since property taxes are set locally in the United States, they differ across communities, with different communities therefore facing different taxes on housing capital. (Note: This exercise presumes you have already gone through exercise 20.9.)

A. Consider the “general equilibrium” effect of the property tax, that is, the effect that results from the mobility of capital across sectors and is in addition to the initial “partial equilibrium” effect you predicted in part

(a) of exercise 20.9.