IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01012721.html
   My bibliography  Save this paper

Oates' Decentralization theorem with Imperfect Household Mobility

Author

Listed:
  • Francis Bloch

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Unal Zenginobuz

    (Bogazici Universitesi)

Abstract

This paper studies how Oates' trade-off between centralized and decentralized public good provision is affected by changes in households' mobility. We show that an increase in household mobility favors centralization. This results from two effects. First, mobility increases competition between jurisdictions in the decentralized régime, resulting in lower levels of public good provision. Second, while tyranny of the majority creates a gap between social welfare in different jurisdictions in the centralized régime, mobility allows agents to move to the majority jurisdiction, raising average social welfare. Our main result is obtained in a baseline model where jurisdictions first choose taxes, and households move in response to tax levels. We show that the result is robust to changes in the objective function and the strategic variable of local governments.

Suggested Citation

  • Francis Bloch & Unal Zenginobuz, 2015. "Oates' Decentralization theorem with Imperfect Household Mobility," Post-Print hal-01012721, HAL.
  • Handle: RePEc:hal:journl:hal-01012721
    DOI: 10.1007/s10797-014-9311-6
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christian Dustmann & Tommaso Frattini & Caroline Halls, 2010. "Assessing the Fiscal Costs and Benefits of A8 Migration to the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 31(1), pages 1-41, March.
    2. Andrés Rodríguez-Pose & Roberto Ezcurra, 2011. "Is fiscal decentralization harmful for economic growth? Evidence from the OECD countries," Journal of Economic Geography, Oxford University Press, vol. 11(4), pages 619-643, July.
    3. Boadway, Robin & Tremblay, Jean-François, 2012. "Reassessment of the Tiebout model," Journal of Public Economics, Elsevier, vol. 96(11), pages 1063-1078.
    4. Hoel, Michael & Shapiro, Perry, 2003. "Population mobility and transboundary environmental problems," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1013-1024, May.
    5. Francis Bloch & Unal Zenginobuz, 2007. "The effect of spillovers on the provision of local public goods," Review of Economic Design, Springer;Society for Economic Design, vol. 11(3), pages 199-216, November.
    6. Ben Lockwood, 2008. "Voting, Lobbying, And The Decentralization Theorem," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 416-431, November.
    7. Dietmar Wellisch, 1995. "Can household mobility solve basic environmental problems?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 245-260, August.
    8. Wellisch, Dietmar, 1994. "Interregional spillovers in the presence of perfect and imperfect household mobility," Journal of Public Economics, Elsevier, vol. 55(2), pages 167-184, October.
    9. Wildasin, David E., 1988. "Nash equilibria in models of fiscal competition," Journal of Public Economics, Elsevier, vol. 35(2), pages 229-240, March.
    10. Koethenbuerger, Marko, 2008. "Revisiting the "Decentralization Theorem"--On the role of externalities," Journal of Urban Economics, Elsevier, vol. 64(1), pages 116-122, July.
    11. Jan K. Brueckner, 2004. "Fiscal Decentralization with Distortionary Taxation: Tiebout vs. Tax Competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(2), pages 133-153, March.
    12. David E. Wildasin, 2006. "Global Competition for Mobile Resources: Implications for Equity, Efficiency and Political Economy," CESifo Economic Studies, CESifo, vol. 52(1), pages 61-110, March.
    13. Epple, Dennis & Nechyba, Thomas, 2004. "Fiscal decentralization," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 55, pages 2423-2480, Elsevier.
    14. Hoel, Michael, 2004. "Interregional interactions and population mobility," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 419-433, November.
    15. Philippe Jehiel & Suzanne Scotchmer, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 393-413.
    16. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    17. Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
    18. Wildasin, David E., 1991. "Some rudimetary 'duopolity' theory," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 393-421, November.
    19. Boadway, Robin, 1982. "On the Method of Taxation and the Provision of Local Public Goods: Comment," American Economic Review, American Economic Association, vol. 72(4), pages 846-851, September.
    20. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    21. Mansoorian, Arman & Myers, Gordon M., 1997. "On the consequences of government objectives for economies with mobile populations," Journal of Public Economics, Elsevier, vol. 63(2), pages 265-281, January.
    22. Naoto Aoyama & Emilson Silva, 2008. "Correlated Pollutants, Interregional Redistribution and Labor Attachment in a Federation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(3), pages 437-437, November.
    23. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
    24. Debraj Ray & Rajiv Vohra, 2001. "Coalitional Power and Public Goods," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1355-1384, December.
    25. Koethenbuerger, Marko, 2014. "Competition for migrants in a federation: Tax or transfer competition?," Journal of Urban Economics, Elsevier, vol. 80(C), pages 110-118.
    26. Michael Hoel & Perry Shapiro, 2004. "Transboundary Environmental Problems with Mobile but Heterogeneous Populations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(3), pages 265-272, March.
    27. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
    28. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    29. Bloch, Francis & Zenginobuz, E. Unal, 2006. "Tiebout equilibria in local public good economies with spillovers," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1745-1763, September.
    30. Janeba, Eckhard & Wilson, John Douglas, 2011. "Optimal fiscal federalism in the presence of tax competition," Journal of Public Economics, Elsevier, vol. 95(11), pages 1302-1311.
    31. Mitsui, Kiyoshi & Sato, Motohiro, 2001. "Ex ante free mobility, ex post immobility, and time consistency in a federal system," Journal of Public Economics, Elsevier, vol. 82(3), pages 445-460, December.
    32. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
    33. Wellisch, Dietmar, 1993. "On the decentralized provision of public goods with spillovers in the presence of household mobility," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 667-679, November.
    34. J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 4, number 4.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicolas Jannin & Aurélie Sotura, 2019. "This Town Ain't Big Enough? Quantifying Local Public Goods Spillovers," Working Papers halshs-02160251, HAL.
    2. Florian Kuhlmey & Beat Hintermann, 2019. "The welfare costs of Tiebout sorting with true public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 1166-1210, October.
    3. Stephanie Armbruster & Beat Hintermann, 2020. "Decentralization with porous borders: public production in a federation with tax competition and spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 606-642, June.
    4. Nicolas Jannin & Aurelie Sotura, 2020. "This Town Ain't Big Enough? Quantifying Public Good Spillovers," Working papers 796, Banque de France.
    5. Nicolas Jannin & Aurélie Sotura, 2019. "This Town Ain't Big Enough? Quantifying Local Public Goods Spillovers," PSE Working Papers halshs-02160251, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francis Bloch & Unal Zenginobuz, 2012. "Oates' Decentralization Theorem with Household Mobility," Working Papers hal-00657823, HAL.
    2. Florian Kuhlmey & Beat Hintermann, 2019. "The welfare costs of Tiebout sorting with true public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 1166-1210, October.
    3. Anton Bondarev & Beat Hintermann & Frank C. Krysiak & Ralph Winkler, 2017. "The Intricacy of Adapting to Climate Change: Flood Protection as a Local Public Goods Game," CESifo Working Paper Series 6382, CESifo.
    4. Robin Boadway & Katherine Cuff & Maurice Marchand, 2003. "Equalization and the Decentralization of Revenue–Raising in a Federation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 201-228, April.
    5. Hoel, Michael, 2004. "Interregional interactions and population mobility," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 419-433, November.
    6. Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2013. "Non-cooperative pollution control in an inter-jurisdictional setting," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 783-796.
    7. Stephanie Armbruster & Beat Hintermann, 2020. "Decentralization with porous borders: public production in a federation with tax competition and spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 606-642, June.
    8. Nicolas Jannin & Aurélie Sotura, 2019. "This Town Ain't Big Enough? Quantifying Local Public Goods Spillovers," PSE Working Papers halshs-02160251, HAL.
    9. Robin Boadway & Katherine Cuff, 2017. "The impressive contribution of Canadian economists to fiscal federalism theory and policy," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1348-1380, December.
    10. Nicolas Jannin & Aurélie Sotura, 2019. "This Town Ain't Big Enough? Quantifying Local Public Goods Spillovers," Working Papers halshs-02160251, HAL.
    11. Nicolas Jannin & Aurelie Sotura, 2020. "This Town Ain't Big Enough? Quantifying Public Good Spillovers," Working papers 796, Banque de France.
    12. Bucovetsky, S., 2011. "Incentive equivalence with fixed migration costs," Journal of Public Economics, Elsevier, vol. 95(11), pages 1292-1301.
    13. Baicker, Katherine & Clemens, Jeffrey & Singhal, Monica, 2012. "The rise of the states: U.S. fiscal decentralization in the postwar period," Journal of Public Economics, Elsevier, vol. 96(11), pages 1079-1091.
    14. Lisa Grazzini & Alessandro Petretto, 2017. "Spillover Effects in a Federal Country with Vertical Tax Externalities," Public Finance Review, , vol. 45(5), pages 701-720, September.
    15. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    16. Hoel, Michael, 2002. "no title provided," University of California at Santa Barbara, Economics Working Paper Series qt5cb1x2jm, Department of Economics, UC Santa Barbara.
    17. Arthur Caplan & Emilson Silva, 2011. "Impure public goods, matching grant rates and income redistribution in a federation with decentralized leadership and imperfect labor mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(3), pages 322-336, June.
    18. Yamaguchi, Chikara, 2004. "Leviathan and pure public goods in a federation with mobile populations," Journal of Applied Economics, Universidad del CEMA, vol. 7(2), pages 1-21, November.
    19. Bloch, Francis & Zenginobuz, E. Unal, 2006. "Tiebout equilibria in local public good economies with spillovers," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1745-1763, September.
    20. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1123-1196, Elsevier.

    More about this item

    Keywords

    Spillovers; Tax competition; Oates' decentralization theorem; Fiscal federalism; Household mobility;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01012721. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.