Peer Group Effects, Sorting, and Fiscal Federalism
AbstractSuppose that, other things equal, an individual's utility increases with the fraction of residents in his community who are rich. Suppose further that the rich are more willing to pay for a local public than are the poor Then the rich may over-provide a local public good, with the aim of dissuading the poor from moving into a community inhabited by the rich. We describe conditions under which the equilibrium will have mixed or homogeneous communities, and conditions under which the rich or the poor benefit from central government rules which constrain local decision making.
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Bibliographic InfoPaper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 091006.
Length: 37 pages
Date of creation: May 2010
Date of revision:
Find related papers by JEL classification:
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-15 (All new papers)
- NEP-MIG-2010-05-15 (Economics of Human Migration)
- NEP-PBE-2010-05-15 (Public Economics)
- NEP-URE-2010-05-15 (Urban & Real Estate Economics)
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