Do tax and expenditure limits provide a free lunch? Evidence on the link between limits and public sector service quality

We summarize research addressing the validity of the argument that constitutional constraints such as Proposition 13 could reduce the size of local governments while having little effect on the quality of public services provided. A growing body of research is producing a consistent conclusion; imposition of tax and expenditure limits results in long-run reductions in the performance of public school students. We provide evidence that reconciles these reductions with the dominant result of the education production literature: dollars matter little. Whether limits are good public policy remains an open question, because work remains on the quantification of their costs and benefits.