SFB 303 Discussion Paper No. A - 566
Author: Kessler, Anke, and Lülfesmann, Christoph
Title: Tiebout and Redistribution in a Model of Residential and Political Choice
Abstract: The paper considers a multi-community model with freely mobile individuals
which differ (a) in
their incomes and (b) their tastes for a local public good. In
each jurisdiction, the amount of public services is determined
by majority vote of the inhabitants, and local spending is financed by a
linear income tax. In making their residential and political choice,
individuals thus face a trade-off between the provisionary and
redistributive effects of policies. We show that
Tiebout-like sorting equilibria exist in this framework, which
contrasts a recent result by Bolton and Roland (1996).
If the spread in tastes among individuals is very large, an almost
perfect sorting according to preferences emerges; otherwise,
stratification into rich and poor communities
Finally, we demonstrate that sorting equilibria even exist if
individuals are allowed to relocate after voting, which gives rise to
tax competition aspects.
Keywords: Local Public Goods, Migration, Fiscal Federalism
JEL-Classification-Number: H71, H73
Creation-Date: December 1997
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