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The segregative properties of endogenous jurisdiction formation with a land market

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  • Nicolas Gravel

    () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Rémy Oddou

    (Université de Cergy-Pontoise - université de Cergy-Pontoise)

Abstract

This paper examines the segregative properties of Tiebout-like endogenous processes of jurisdiction formation in presence of a competitive land market. In the model considered, a continuum of households with different wealth levels and the same preferences for local public goods, private spending and housing choose a location from a finite set. Each location has an initial endowment of housing that is priced competively and that belongs to absentee landlords. Each jurisdiction is also endowed with a specific technology for producing public goods. Households' preferences are assumed to be homothetically separable between local public goods on the one hand and private spending and housing on the other. Public goods provision is financed by a given, but unspecified, mixture of (linear) wealth and housing taxes. We show that stable jurisdiction structures are always segregated by wealth only if households view any public good conditionally on the quantities of the other public goods as either always a gross substitute, or either always a gross complement, to private spending. We also show that, if there are more than one public good, this condition is not sufficient for segregation unless households preferences are additively separable. Since this condition is necessary and sufficient for the segregation of stable jurisdiction structures without land market and with only one public good, our results suggests that introducing a land market does not affect the segregative properties of endogenous jurisdiction formation but that increasing the number of public goods mitigates segregation.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00634009.

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Date of creation: 20 Oct 2011
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Handle: RePEc:hal:wpaper:halshs-00634009

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Keywords: Land market; segregation; jurisdictions; local taxes; mobility.;

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  1. Nicolas Gravel & Sylvie Thoron, 2003. "Does endogenous formation of jurisdictions lead to wealth stratification?," IDEP Working Papers 0306, Institut d'economie publique (IDEP), Marseille, France.
  2. Morris A. Davis & François Ortalo-Magné, 2007. "Household Expenditures, Wages, Rents," CESifo Working Paper Series 2156, CESifo Group Munich.
  3. Biswas, Rongili & Gravel, Nicolas & Oddou, Rémy, 2009. "The segregative properties of endogenous jurisdictions formation with a welfarist central government," POLIS Working Papers 121, Institute of Public Policy and Public Choice - POLIS.
  4. Denzau, Arthur T. & Parks, Robert P., 1983. "Existence of voting-market equilibria," Journal of Economic Theory, Elsevier, vol. 30(2), pages 243-265, August.
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