We study whether "coercive" public provision or voluntary private provision of public goods can survive when individuals who "vote with their feet" can choose between communities that differ in the way that public goods are provided. We obtain the following findings: (i) an equilibrium always exists in which all individuals to the community which uses voluntary provision; (ii) under very robust conditions on preferences and income distribution, an equilibrium exists in which all individuals migrate to the community which uses coercive provision; (iii) "interior" equilibria in which collections of individuals move to both communities exist when income distribution is sufficiently polarized. Such equilibria are shown to be stratified -- richer individuals migrate to the community with voluntary provision while poorer individuals reside in the public provision community. In the case where there are two types of wealth endowments, existence of stratified equilibria seems to require a negative tradeoff between the wealth ratio of the rich to the poor and the numerical ratio of rich to poor in society.
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations H41 - Public Economics - - Publicly Provided Goods - - - Public Goods H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
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