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Income Stratifcation in Multi-Community Models

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  • Kurt Schmidheiny

Abstract

This paper presents necessary conditions for stratification of the population in multi-community models with housing markets and heterogeneous households. The conditions for the sorting of the population according to income classes or other dimensions of heterogeneity are established without explicitly describing the household utility function and budget constraint. They therefore apply to a broad class of models, including models with income taxation and property taxation. The stratification conditions in the existing literature are surveyed using a common framework and a series of new and less specific models are proposed. The analysis suggests that in models with income taxation, stratification can often only be established under very specific assumptions on the household's preferences. Furthermore, stratification cannot be ensured with progressive or regressive tax schemes.

Suggested Citation

  • Kurt Schmidheiny, 2002. "Income Stratifcation in Multi-Community Models," Diskussionsschriften dp0215, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp0215
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    2. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
    3. Kurt Schmidheiny, 2002. "Equilibrium and Stratification with Local Income Taxation when Households Differ in both Preferences and Incomes," Diskussionsschriften dp0216, Universitaet Bern, Departement Volkswirtschaft.
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    8. Dennis Epple & Thomas Romer & Holger Sieg, 2001. "Interjurisdictional Sorting and Majority Rule: An Empirical Analysis," Econometrica, Econometric Society, vol. 69(6), pages 1437-1465, November.
    9. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
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    12. Goodspeed, Timothy J., 1989. "A re-examination of the use of ability to pay taxes by local governments," Journal of Public Economics, Elsevier, vol. 38(3), pages 319-342, April.
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    14. Ross, Stephen & Yinger, John, 1999. "Sorting and voting: A review of the literature on urban public finance," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 47, pages 2001-2060, Elsevier.
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    Citations

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    Cited by:

    1. Kuhlmey, Florian, 2017. "Local income tax competition with progressive taxes and a fiscal equalization scheme," Working papers 2017/17, Faculty of Business and Economics - University of Basel.
    2. Schmidheiny, Kurt, 2006. "Income segregation and local progressive taxation: Empirical evidence from Switzerland," Journal of Public Economics, Elsevier, vol. 90(3), pages 429-458, February.
    3. Christian Frey & Christoph Gorgas & Christoph A. Schaltegger, 2017. "The Long Run Effects of Taxes and Tax Competition on top Income Shares: An Empirical Investigation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 792-820, December.
    4. Schmidheiny, Kurt, 2006. "Income segregation from local income taxation when households differ in both preferences and incomes," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 270-299, March.
    5. Kurt Schmidheiny, 2002. "Equilibrium and Stratification with Local Income Taxation when Households Differ in both Preferences and Incomes," Diskussionsschriften dp0216, Universitaet Bern, Departement Volkswirtschaft.
    6. Kuhlmey, Florian, 2017. "Income vs. property tax competition: A normative comparison," Working papers 2017/18, Faculty of Business and Economics - University of Basel.
    7. Schaltegger, Christoph A. & Somogyi, Frank & Sturm, Jan-Egbert, 2011. "Tax competition and income sorting: Evidence from the Zurich metropolitan area," European Journal of Political Economy, Elsevier, vol. 27(3), pages 455-470, September.
    8. Francisco Martínez Mora, 2004. "Opting-out and income mixing in urban economies:the role of neighborhood effects," Economic Working Papers at Centro de Estudios Andaluces E2004/67, Centro de Estudios Andaluces.
    9. Pan, Chen-Yu, 2020. "Protections from natural disasters as local public goods: Migration and local adaptations," Regional Science and Urban Economics, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    stratifcation; fiscal federalism; income taxation; local public goods;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • 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

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