The Tiebout hypothesis under membership property rights

Abstract

We consider the problem of producing an impure public good in various jurisdictions formed through the strategic decisions of agents. Our environment inherits two well-known problems:(i) Under individual decisions, there is a tension between stability and e¢ ciency;(ii) Under coalitional decisions, stable jurisdiction structures may fail to exist.The solution we propose is the use of membership property rights: When a move among jurisdictions is subject to the approval of the agents whom it a¤ects, coalitionally stable jurisdiction structures coincide with those which are e¢ cient.