Equilibria with Local Governments and Commuting: Income Sorting vs. Income Mixing
AbstractTiebout's (1956) model of fiscal competition suggests income sorting between jurisdictions while the Alonso (1964), Mills (167) and Muth (1969) model of the monocentric city suggests income sorting over space. However, strict income sorting is not empirically observed. We add fiscal competition to the spatial model by considering a circular inner city surrounded by a suburb. The fiscal difference between the jurisdictions and the commuting advantage of locations closer to the city center are capitalized into house prices. In addition to the traditional equilibrium with income sorting, there are equilibria with income mixing - both across jurisdictions and across space.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-01.
Length: 51 pages
Date of creation: Jun 2002
Date of revision: Mar 2003
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Community; sorting; capitalization;
Other versions of this item:
- de Bartolome, Charles A. M. & Ross, Stephen L., 2003. "Equilibria with local governments and commuting: income sorting vs income mixing," Journal of Urban Economics, Elsevier, vol. 54(1), pages 1-20, July.
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
This paper has been announced in the following NEP Reports:
- NEP-PBE-2002-10-18 (Public Economics)
- NEP-PUB-2002-10-18 (Public Finance)
- NEP-URE-2002-10-18 (Urban & Real Estate Economics)
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