PUBLIC GOODS, PRIVATE INCENTIVES, AND AGRICULTURAL R&D: PRODUCTIVITY AND POVERTY IN DEVELOPING COUNTRY AGRICULTURE Like Baker, McMillan, and Reuben (2002), I identify parental valuations by the location of clusters of high income families: If parental preferences over communities depend exclusively on the effectiveness of the local schools, the most desirable and therefore wealthiest communities are necessarily those with the most effective schools. If peer group matters at all to parents, however, there can be unsorted equilibria in which communities with ineffective schools have the wealthiest residents and are the most preferred. These equilibria result from coordination failures: The wealthy families in ineffective districts would collectively have the highest bids.
