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Standing Tiebout on His Head: Tax Capitalization and the Monopoly Power of Local Governments

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  • Caplan, Bryan

Abstract

Much of the public finance literature argues that local governments behave competitively due to residents' ease of exit and entry. The model presented here challenges this widespread conclusion. Though it is costless to relocate to another locality, the presence of tax capitalization makes it impossible for land-owners to avoid monopolistic pricing of public services by moving; land-owners can only choose between paying the tax directly, or paying it indirectly in the form of a lower sale value for their housing if they exit. In consequence, the only real check on local governments comes through imperfectly functioning electoral channels. Copyright 2001 by Kluwer Academic Publishers

Suggested Citation

  • Caplan, Bryan, 2001. "Standing Tiebout on His Head: Tax Capitalization and the Monopoly Power of Local Governments," Public Choice, Springer, vol. 108(1-2), pages 101-122, July.
  • Handle: RePEc:kap:pubcho:v:108:y:2001:i:1-2:p:101-22
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    Cited by:

    1. Edward Stringham, 2006. "Overlapping Jurisdictions, Proprietary Communities, and Competition in the Realm of Law," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(3), pages 516-534, September.
    2. Hausken, Kjell & Knutsen, John F., 2010. "An enabling mechanism for the creation, adjustment, and dissolution of states and governmental units," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-38.
    3. Mehrdad Vahabi, 2016. "A positive theory of the predatory state," Public Choice, Springer, vol. 168(3), pages 153-175, September.
    4. repec:eee:pubeco:v:158:y:2018:i:c:p:12-24 is not listed on IDEAS
    5. Göbel, Jürgen, 2009. "In search of an appropriate tax base for local Leviathans," MPRA Paper 13940, University Library of Munich, Germany.
    6. Kjell Hausken & John F. Knutsen, 2002. "The Birth, Adjustment and Death of States," Public Economics 0205004, EconWPA.
    7. Stringham, Edward P. & Miller, Jennifer K. & Clark, Jeff Ray, 2010. "Internalizing Externalities Through Private Zoning: The Case of Walt Disney Company's Celebration, Florida," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 40(2).
    8. Thomas Apolte, 2004. "Die eigentümliche Diskussion um Zentralisierung und Dezentralisierung in der Europapolitik," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(3), pages 271-291, August.

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