Capitalization and sorting: A revision

Can “matched” sorting, the assignment of high-income households to communities with high-quality public services, be sustained by competition alone? This article revises an analysis of this question and extends this analysis to consider a simple case of zoning. This revision reveals that housing market competition cannot sustain matched sorting under all circumstances but is likely to do so given available estimates of the relevant elasticities. Moreover, a simple zoning policy can lead to matched sorting whenever competition is not sufficient.