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Population Population Movements in the Presence of Agglomeration and Congestion Effects: Local Policy and the Social Optimum

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Abstract

We investigate the efficiency properties of population mobility when localities compete in an environment with local amenities and local externalities. Our model is dynamic, incorporating land and labor markets in a context where firms and workers form rational expectations. Concern focuses on whether and under what conditions the substantive conclusions from static models can be reinterpreted to apply in a dynamic context where moving is costly. In the spirit of Tiebout (1956), it can be shown in a static model that taxes or subsidies developed by each local jurisdiction representing the interests of landowners can induce an efficient population allocation even in the presence of local externalities. We show that, in a dynamic model, efficiency of mobility requires that localities represent the interests of other local stakeholders, including residents and firms, as well as landowners. Under certain circumstances, the dynamic model resolves problems of indeterminacy implicit in the static model due to multiple equilibria. On the other hand, we also find that there may be multiple sets of equilibrium flows corresponding with alternative expectations. We consider institutional arrangements that may facilitate preferred paths.

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File URL: http://economics.missouri.edu/working-papers/2011/WP1123_Mandy_Mueser.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 1123.

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Length: 54 pages
Date of creation: 15 Oct 2011
Date of revision:
Handle: RePEc:umc:wpaper:1123

Note: Substantial update of WP08-02
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Keywords: Local taxation; Population externalities; Migration;

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  4. Rappaport, Jordan, 2004. "Why are population flows so persistent?," Journal of Urban Economics, Elsevier, vol. 56(3), pages 554-580, November.
  5. Mueser Peter R. & Graves Philip E., 1995. "Examining the Role of Economic Opportunity and Amenities in Explaining Population Redistribution," Journal of Urban Economics, Elsevier, vol. 37(2), pages 176-200, March.
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  20. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
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