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Transaction Costs in a Tiebout Setup

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  • Eitan Berglas
  • David Pines

Abstract

The paper addresses three issues related to Tiebout-type equilibrium: (a) Is the property tax a second-best instrument? (b) Given the feasible instrument menu, is a Tiebout-type allocation with profit-maximizing suppliers of the LPG constrained efficient? (c) Given the ranking of instruments, are profit maximizing developers better equipped with instruments conductive to efficiency than local jurisdictions? It is shown that the property tax is not necessarily a second-best instrument, that Tiebout-type equilibrium is constrained efficient, and that developers in the strict sense lack the second-best instruments available to local governments.

Suggested Citation

  • Eitan Berglas & David Pines, 1997. "Transaction Costs in a Tiebout Setup," Annals of Economics and Statistics, GENES, issue 45, pages 183-197.
    • Handle: RePEc:adr:anecst:y:1997:i:45:p:183-197
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