Taste-homogeneity of Optimal Jurisdictions in a Tiebout Economy with Crowding Types
We consider a new model of a local public goods economy with differentiated crowding in which we make a distinction between the tastes and crowding characteristics of agents. It is possible in this model to have taste-homogeneous jurisdictions that take advantage of the full array of positive crowding effects (labor complementarities, for example.) We nevertheless find that taste-heterogeneous jurisdictions are sometimes strictly superior to taste-homogeneous jurisdictions with the same crowding profile. We also provide an example which illustrates the difficulties in extending the intuitive results from the hedonic pricing literature to Tiebout economies with differentiated crowding.
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