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Sorting by Foot: Consumable Travel-for Local Public Good and Equilibrium Stratification

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Abstract

This paper reexamine Tiebout’s hypothesis of endogenous sorting in a competitive spatial equilibrium setup with both income and preference heterogeneity. Agents decide endogenously the number of trips to consume a travel-for congestable local public good. We show that the equilibrium configuration may be completely segregated, incompletely segregated or completely integrated, depending crucially on the scale of local public good services, relative market rents and the underlying income/preference/local tax parameters. Segregated equilibrium may feature endogenous sorting purely by income or by both income and preferences. Multiple equilibria may arise when the equilibrium configuration is incompletely segregated.

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Bibliographic Info

Paper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 03-A008.

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Length: 27 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:sin:wpaper:03-a008

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Keywords: Endogenous Sorting; Integrated/Segregated Equilibrium; Income/Preference Heterogeneity;

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  1. Berliant, Marcus & Peng, Shin-Kun & Wang, Ping, 2006. "Welfare analysis of the number and locations of local public facilities," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 207-226, March.
  2. Michel Le Breton & Hideo Konishi & Shlomo Weber, 1996. "Equivalence of strong and coalition-proof Nash equilibria in games without spillovers (*)," Economic Theory, Springer, vol. 9(1), pages 97-113.
  3. Conley, John P. & Wooders, Myrna H., 2001. "Tiebout Economies with Differential Genetic Types and Endogenously Chosen Crowding Characteristics," Journal of Economic Theory, Elsevier, vol. 98(2), pages 261-294, June.
  4. Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R. Zame, 1999. "Clubs and the Market," Econometrica, Econometric Society, vol. 67(5), pages 1185-1218, September.
  5. Arnott, Richard J & Stiglitz, Joseph E, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 471-500, November.
  6. Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October.
  7. Roland Benabou, 1996. "Heterogeneity, Stratification, and Growth," NBER Working Papers 4311, National Bureau of Economic Research, Inc.
  8. 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.
  9. O'Regan Katherine M. & Quigley John M., 1993. "Family Networks and Youth Access to Jobs," Journal of Urban Economics, Elsevier, vol. 34(2), pages 230-248, September.
  10. Bond, Eric W. & Coulson, N. Edward, 1989. "Externalities, filtering, and neighborhood change," Journal of Urban Economics, Elsevier, vol. 26(2), pages 231-249, September.
  11. Patrick Bayer & Robert McMillan & Kim Rueben, 2005. "Residential Segregation in General Equilibrium," NBER Working Papers 11095, National Bureau of Economic Research, Inc.
  12. Fujita, Masahisa, 1986. "Optimal location of public facilities : Area dominance approach," Regional Science and Urban Economics, Elsevier, vol. 16(2), pages 241-268, May.
  13. THISSE, Jacques & WILDASIN, David, 1990. "Public facility location and urban spatial structure. Equilibrium and welfare analysis," CORE Discussion Papers 1990025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. 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.
  15. Schwab, Robert M. & Oates, Wallace E., 1991. "Community composition and the provision of local public goods : A normative analysis," Journal of Public Economics, Elsevier, vol. 44(2), pages 217-237, March.
  16. Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-65, November.
  17. Konishi, Hideo, 1996. "Voting with Ballots and Feet: Existence of Equilibrium in a Local Public Good Economy," Journal of Economic Theory, Elsevier, vol. 68(2), pages 480-509, February.
  18. Hartwick, John & Schweizer, Urs & Varaiya, Pravin, 1976. "Comparative statics of a residential economy with several classes," Journal of Economic Theory, Elsevier, vol. 13(3), pages 396-413, December.
  19. Wildasin, David E., 1987. "Theoretical analysis of local public economics," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 29, pages 1131-1178 Elsevier.
  20. Edward E. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995. "Crime and Social Interactions," Harvard Institute of Economic Research Working Papers 1738, Harvard - Institute of Economic Research.
  21. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  22. Ellickson, Bryan, 1979. "Competitive equilibrium with local public goods," Journal of Economic Theory, Elsevier, vol. 21(1), pages 46-61, August.
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