Sorting by foot: ‘travel‐for’ local public goods and equilibrium stratification

Abstract

We re-examine Tiebout's hypothesis of endogenous sorting in a competitive spatial equilibrium framework, by considering both income and preference heterogeneity and by allowing agents to decide endogenously the number of visits to a 'travel-for' local public good. The equilibrium configuration may be completely segregated, incompletely segregated, or completely integrated, depending on relative market rents and income/preference/local tax parameters. A segregated equilibrium may feature endogenous sorting purely by income or by both income and preferences. While the rich need not be closer to the local public facility site, multiple equilibria may arise when the equilibrium configuration is incompletely segregated. JEL classification: D50, H41Classification par de´placement : biens publics locaux accessibles par de´placement et stratification d'e´quilibre. Les auteurs re´examinent l'hypothe`se de Tiebout de classification endoge`ne dans un cadre d'e´quilibre spatial concurrentiel en tenant compte a`la fois de l'he´te´roge´ne´ite´des revenus et des pre´fe´rences, ainsi qu'en permettant aux agents de de´cider de manie`re endoge`ne du nombre de visites pour se procurer un bien public local par de´placement. Il peut s'ensuivre des e´quilibres de se´gre´gation comple`te, de se´gre´ga-tion incomple`te, ou d'inte´gration comple`te, selon les rentes relatives et les parame`tres deThe first author is also affiliated with National Taiwan University, while the second author is a research associate of NBER. We are grateful for valuable comments and suggestions from revenus, de pre´fe´rences ou de fiscalite´locale. Un e´quilibre de se´gre´gation peut entraıˆner une classification endoge`ne sur la base seulement des revenus ou sur la base des revenus et des pre´fe´rences. Alors que les riches n'ont pas besoin d'eˆtre plus proches du site du bien public local, des e´quilibres multiples peuvent surgir quand la configuration d'e´qui-libre en est une de se´gre´gation incomple`te.

Intergenerational human capital evolution, local public good preferences, and stratification

“…In the benchmark case, the latter effect turns out to be dominant and, as a result, higher wealth mitigates locational segregation. It is informative to compare our results with those in previous studies, particularly, two closely related papers by Benabou (1996a) and Peng and Wang (2005). Similar to Benabou, local human capital spillovers are crucial for determining whether an economy is stratified.…”

“…2 In Peng and Wang (2005), income and LPG preference heterogeneities are considered as the two driving forces of stratification in a static setup. 3 In the endogenous-sorting framework, the cardinal properties of preferences are important.…”

Can information asymmetry cause stratification?

“…For instance, Konishi (2008) is a …ne example of sorting driven by local public goods in the Tiebout tradition; he also considers adverse selection in that context. Older contributions include Nechyba (1997) and Peng and Wang (2005). In this literature, of course, sorting is driven by local public goods, income and taste.…”

A Normative Analysis of Housing‐Related Tax Policy in a General Equilibrium Model of Housing Quality and Prices

“…12 12 See the simple setup of a “travel‐for” local public good and further discussion in Peng and Wang (2005). …”

“…See the simple setup of a "travel-for" local public good and further discussion inPeng and Wang (2005).13 Denoting the service of public amenities as g , one may specify: g(z) = e −δz G, where δ > 0 measures the spatial discount of the public good service. Then households' valuation of housing quality inclusive of public amenity services is given by, βq (z) θ + γ (ln G − δz).…”