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The impact of fiscal decentralization on income segregation

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Abstract

We investigate how decentralizing the provision and funding of a publicly provided good from central (or regional) to local governments affects income segregation in an urban area. As the previous theoretical literature suggests, local provision and funding of a publicly provided good by itself generates incentives for income segregation. However, other segregating forces such as local amenities are also at work in urban areas. We show that, once this important feature of urban economies is considered, decentralisation will reduce income segregation if the population has heterogeneous preferences for the publicly provided good.

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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/68.

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Length: 47 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:cea:doctra:e2004_68

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Keywords: fiscal decentralisation; segregation; Tiebout; residential mobility.;

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  1. Dennis N. Epple & Richard Romano, 2003. "Neighborhood Schools, Choice, and the Distribution of Educational Benefits," NBER Chapters, in: The Economics of School Choice, pages 227-286 National Bureau of Economic Research, Inc.
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  7. Thomas J. Nechyba, 1996. "Existence of Equilibrium and Stratification in Local and Hierarchical Tiebout Economies with Property Taxes and Voting," NBER Technical Working Papers 0190, National Bureau of Economic Research, Inc.
  8. Epple, Dennis & Nechyba, Thomas, 2004. "Fiscal decentralization," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 55, pages 2423-2480 Elsevier.
  9. Bjorvatn, K. & Cappelen, A.W., 2000. "Inequality, Segregation, and Redistribution," Papers 13/00, Norwegian School of Economics and Business Administration-.
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  12. Bassett, William F. & Burkett, John P. & Putterman, Louis, 1999. "Income distribution, government transfers, and the problem of unequal influence," European Journal of Political Economy, Elsevier, vol. 15(2), pages 207-228, June.
  13. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  14. Scotchmer, Suzanne, 2002. "Local public goods and clubs," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 29, pages 1997-2042 Elsevier.
  15. Nechyba, Thomas J., 2002. "Centralization, Fiscal Federalism and Privte School Attendance," Working Papers 02-11, Duke University, Department of Economics.
  16. Charles A. M. de Bartolome & Stephen L. Ross, 2002. "Equilibria with Local Governments and Commuting: Income Sorting vs. Income Mixing," Working papers 2002-01, University of Connecticut, Department of Economics, revised Mar 2003.
  17. Nechyba, Thomas J, 1997. "Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 351-84, April.
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  19. Benabou, Roland, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 237-64, April.
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