SFB 303 Discussion Paper No. A - 566
Author: Kessler, Anke, and Lülfesmann, Christoph
Title: Tiebout and Redistribution in a Model of Residential and Political Choice
Abstract: The paper considers a multi-community model with freely mobile individuals
which differ (a) in
their incomes and (b) their tastes for a local public good. In
each jurisdiction, the amount of public services is determined
by majority vote of the inhabitants, and local spending is financed by a
residence-based
linear income tax. In making their residential and political choice,
individuals thus face a trade-off between the provisionary and
redistributive effects of policies. We show that
Tiebout-like sorting equilibria exist in this framework, which
contrasts a recent result by Bolton and Roland (1996).
If the spread in tastes among individuals is very large, an almost
perfect sorting according to preferences emerges; otherwise,
stratification into rich and poor communities
is more
pronounced.
Finally, we demonstrate that sorting equilibria even exist if
individuals are allowed to relocate after voting, which gives rise to
tax competition aspects.
Keywords: Local Public Goods, Migration, Fiscal Federalism
JEL-Classification-Number: H71, H73
Creation-Date: December 1997
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