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Equilibria with Local Governments and Commuting: Income Sorting vs. Income Mixing

  • Charles A. M. de Bartolome

    (University of Colorado)

  • Stephen L. Ross

    (University of Connecticut)

Tiebout's (1956) model of fiscal competition suggests income sorting between jurisdictions while the Alonso (1964), Mills (167) and Muth (1969) model of the monocentric city suggests income sorting over space. However, strict income sorting is not empirically observed. We add fiscal competition to the spatial model by considering a circular inner city surrounded by a suburb. The fiscal difference between the jurisdictions and the commuting advantage of locations closer to the city center are capitalized into house prices. In addition to the traditional equilibrium with income sorting, there are equilibria with income mixing - both across jurisdictions and across space.

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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-01.

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Length: 51 pages
Date of creation: Jun 2002
Date of revision: Mar 2003
Handle: RePEc:uct:uconnp:2002-01
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Web page: http://www.econ.uconn.edu/

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  1. Brueckner, J.K., 1990. "Tastes, Skills, And Local Public Goods," Working Papers 8, John Deutsch Institute for the Study of Economic Policy.
  2. Wheaton, William C, 1977. "Income and Urban Residence: An Analysis of Consumer Demand for Location," American Economic Review, American Economic Association, vol. 67(4), pages 620-31, September.
  3. McGuire, Martin, 1974. "Group Segregation and Optimal Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 112-32, Jan.-Feb..
  4. LeRoy, Stephen F. & Sonstelie, Jon, 1983. "Paradise lost and regained: Transportation innovation, income, and residential location," Journal of Urban Economics, Elsevier, vol. 13(1), pages 67-89, January.
  5. Edward L. Glaeser & Matthew E. Kahn & Jordan Rappaport, 2000. "Why Do the Poor Live in Cities?," NBER Working Papers 7636, National Bureau of Economic Research, Inc.
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  7. Wheaton, William C., 1975. "Consumer mobility and community tax bases : The financing of local public goods," Journal of Public Economics, Elsevier, vol. 4(4), pages 377-384, November.
  8. Nechyba, Thomas, 1996. "A computable general equilibrium model of intergovernmental aid," Journal of Public Economics, Elsevier, vol. 62(3), pages 363-397, November.
  9. Berglas, Eitan & Pines, David, 1981. "Clubs, local public goods and transportation models : A synthesis," Journal of Public Economics, Elsevier, vol. 15(2), pages 141-162, April.
  10. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  11. Montesano, Aldo, 1972. "A restatement of Beckmann's model on the distribution of urban rent and residential density," Journal of Economic Theory, Elsevier, vol. 4(2), pages 329-354, April.
  12. McGuire, Martin C, 1991. "Group Composition, Collective Consumption, and Collaborative Production," American Economic Review, American Economic Association, vol. 81(5), pages 1391-407, December.
  13. Berglas, Eitan, 1976. "On the Theory of Clubs," American Economic Review, American Economic Association, vol. 66(2), pages 116-21, May.
  14. Yinger, John, 1982. "Capitalization and the Theory of Local Public Finance," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 917-43, October.
  15. 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.
  16. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, vol. 24(3), pages 281-308, August.
  17. Joseph E. Stiglitz, 1981. "Public Goods in Open Economies with Heterogeneous Individuals," NBER Working Papers 0802, National Bureau of Economic Research, Inc.
  18. Ellickson, Bryan, 1971. "Jurisdictional Fragmentation and Residential Choice," American Economic Review, American Economic Association, vol. 61(2), pages 334-39, May.
  19. Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 18(2), pages 328-348, August.
  20. Ross, Stephen & Yinger, John, 1999. "Sorting and voting: A review of the literature on urban public finance," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 47, pages 2001-2060 Elsevier.
  21. Persky, Joseph, 1990. "Suburban income inequality : Three theories and a few facts," Regional Science and Urban Economics, Elsevier, vol. 20(1), pages 125-137, June.
  22. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
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