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Equilibria with Local Governments and Commuting: Income Sorting vs. Income Mixing

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  • Charles A. M. de Bartolome

    (University of Colorado)

  • Stephen L. Ross

    (University of Connecticut)

Abstract

Tiebout'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 Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-01.

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Length: 51 pages
Date of creation: Jun 2002
Date of revision: Mar 2003
Handle: RePEc:uct:uconnp:2002-01

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Web page: http://www.econ.uconn.edu/
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Keywords: Community; sorting; capitalization;

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References

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  1. Wheaton, William C, 1977. "Income and Urban Residence: An Analysis of Consumer Demand for Location," American Economic Review, American Economic Association, vol. 67(4), pages 620-31, September.
  2. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
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  18. Montesano, Aldo, 1972. "A restatement of Beckmann's model on the distribution of urban rent and residential density," Journal of Economic Theory, Elsevier, vol. 4(2), pages 329-354, April.
  19. 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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