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The Tiebout Hypothesis and Majority Rule: An Empirical Analysis

  • Dennis Epple
  • Thomas Romer
  • Holger Sieg
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    The paper provides a comprehensive empirical analysis of majority rule and Tiebout sorting within a system of local jurisdictions. The idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice. The estimator controls for both observed and unobserved heterogeneity among households, observed and unobserved characteristics of communities, the potential endogeneity of prices and expenditures as well as the self-selection of households into communities of their choice. We estimate the structural parameters of the model using data from the Boston Metropolitan Area. The empirical findings are by and large supportive of our approach.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6977.

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    Date of creation: Feb 1999
    Date of revision:
    Publication status: published as A revision of this paper was published as: “Interjurisdictional Sorting and Majority Rule: An Empirical Analysis,� D. Epple, T. Romer and H. Sieg, Econometrica, November 2001.
    Handle: RePEc:nbr:nberwo:6977
    Note: PE
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    6. Goodspeed, Timothy J., 1989. "A re-examination of the use of ability to pay taxes by local governments," Journal of Public Economics, Elsevier, vol. 38(3), pages 319-342, April.
    7. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
    8. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
    9. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September.
    10. Rubinfeld, Daniel L & Shapiro, Perry & Roberts, Judith, 1987. "Tiebout Bias and the Demand for Local Public Schooling," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 426-37, August.
    11. Fernandez, Raquel & Rogerson, Richard, 1998. "Public Education and Income Distribution: A Dynamic Quantitative Evaluation of Education-Finance Reform," American Economic Review, American Economic Association, vol. 88(4), pages 813-33, September.
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    18. Gilles, Robert P. & Scotchmer, Suzanne, 1995. "Decentralization in Replicated Club Economies with Multiple Private Goods," Department of Economics, Working Paper Series qt22k559dk, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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