A Tiebout Theory of Public vs Private Provision of Collective Goods
AbstractWe 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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Date of creation: 05 Jul 1997
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Tiebout migration; public provision; private provision; viable mechanisms; interior equilibria; stratification;
Other versions of this item:
- Glomm, Gerhard & Lagunoff, Roger, 1998. "A Tiebout theory of public vs private provision of collective goods," Journal of Public Economics, Elsevier, vol. 68(1), pages 91-112, April.
- 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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