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A Dynamic Tiebout Theory of Voluntary versus Involuntary Provision of Public Goods

Author

Listed:
  • Gerhard Glomm

    (Michigan State University)

  • Roger Lagunoff

    (Georgetown University)

Abstract

This paper considers a dynamic model of Tiebout-like migration between communities that utilize distinct allocation procedures for public goods. At issue is whether voluntary or compulsory procedures are more likely to prevail over time. We model infinitely lived individuals who make repeated, sequential location decisions over one of two communities. Each community uses a distinct mechanism for allocating public goods. The first is one in which contributions are given voluntarily by the citizenry of the community. The second is a compulsory scheme by which individuals are taxed proportionately to wealth with the tax determined by a majority vote. Opportunities to accumulate wealth exist via accumulation of public capital. The Markov Perfect equilibria of the dynamic game are studied. Our main result shows that when accumulated wealth converges to a steady state, individuals' locational choices eventually ``select" the involuntary provision mechanism. This holds despite the fact that unanimous location in the voluntary provision community may in many cases remain as a Nash equilibrium of the static game each period. We also describe conditions under which voluntary provision survives. These conditions require that accumulation of capital fails to decrease wealth dispersion over time. The results are shown to be consistent with findings relating inequality to school choice.

Suggested Citation

  • Gerhard Glomm & Roger Lagunoff, 1999. "A Dynamic Tiebout Theory of Voluntary versus Involuntary Provision of Public Goods," Game Theory and Information 9901002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpga:9901002
    Note: Type of Document - Acrobat pdf file; prepared on IBM PC - PC- TEX ; to print on Acrobat PDF Writer; pages: 29 ; figures: included. This is the revised and final version forthcoming in Review of Economic Studies. We have benefitted from the helpful suggestions of Andrew Austin, Marcus Berliant, Yan Chen, Hyun Song Shin, an anonymous referee, and numerous seminar participants.
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    References listed on IDEAS

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    Cited by:

    1. John P. Conley & Robert Driskill & Ping Wang, 2019. "Capitalization, decentralization, and intergenerational spillovers in a Tiebout economy with a durable public good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(1), pages 1-27, February.
    2. Roger Hewett & Charles A. Holt & Georgia Kosmopoulou & Christine Kymn & Cheryl X. Long & Shabnam Mousavi & Sudipta Sarangi, 2005. "A Classroom Exercise: Voting by Ballots and Feet," Southern Economic Journal, John Wiley & Sons, vol. 72(1), pages 253-263, July.
    3. Holger Sieg & Daniele Coen-Pirani & Jeffrey Brinkman, 2015. "The Political Economy of Underfunded Municipal Pension Plans," 2015 Meeting Papers 345, Society for Economic Dynamics.
    4. Sigrid Röhrs & David Stadelmann, 2014. "Homeownership, Mobility, And Local Income Redistribution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(4), pages 569-605, August.

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    More about this item

    Keywords

    Tiebout model; voluntary mechanisms; compulsory mechanisms; Markov Perfect Equilibrium;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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