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Peer Group Effects, Sorting, and Fiscal Federalism

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  • Sam Bucovetsky

    (Department of Economics, York University)

  • Amihai Glazer

    (Department of Economics, University of California-Irvine)

Abstract

Suppose that, other things equal, an individual's utility increases with the fraction of residents in his community who are rich. Suppose further that the rich are more willing to pay for a local public than are the poor Then the rich may over-provide a local public good, with the aim of dissuading the poor from moving into a community inhabited by the rich. We describe conditions under which the equilibrium will have mixed or homogeneous communities, and conditions under which the rich or the poor benefit from central government rules which constrain local decision making.

Suggested Citation

  • Sam Bucovetsky & Amihai Glazer, 2010. "Peer Group Effects, Sorting, and Fiscal Federalism," Working Papers 091006, University of California-Irvine, Department of Economics.
    • Handle: RePEc:irv:wpaper:091006
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    References listed on IDEAS

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    2. Anupam Nanda & Jia-Huey Yeh, 2016. "Reflected Glory Versus Repulsive Envy: How Do the Smiths Feel About the House of the Joneses?," Asian Economic Journal, East Asian Economic Association, vol. 30(3), pages 317-341, September.

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    Keywords

    Status; Migration;

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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