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Efficiency, equilibrium and exclusion when the poor chase the rich

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  • Bucovetsky, Sam
  • Glazer, Amihai

Abstract

Using a simple adverse selection model, we characterize equilibrium when the rich chase the poor. If communities are established by competitive entrepreneurs, the equilibrium exists, is unique, and is efficient. It involves either complete separation, or complete pooling. Different income groups may rank these qualitative outcomes differently. We show how restrictions imposed by a central government may alter the nature of equilibrium: such restrictions may be explained as the choice of a low-income majority altering the equilibrium to the pooling outcome which they prefer.

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  • Bucovetsky, Sam & Glazer, Amihai, 2014. "Efficiency, equilibrium and exclusion when the poor chase the rich," Journal of Urban Economics, Elsevier, vol. 81(C), pages 166-177.
    • Handle: RePEc:eee:juecon:v:81:y:2014:i:c:p:166-177
    DOI: 10.1016/j.jue.2014.03.006
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    More about this item

    Keywords

    Exclusionary policies; Sorting; Decentralization;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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