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The Welfare Costs of Tiebout Sorting with True Public Goods

Kuhlmey, Florian and Hintermann, Beat. (2018) The Welfare Costs of Tiebout Sorting with True Public Goods. WWZ Working Papers, 2019 (01). Basel.

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Official URL: https://edoc.unibas.ch/68754/

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Abstract

We develop a model of Tiebout sorting based on decentralized income taxation, which allows for spillovers and imperfect rivalry in consumption of the publicly provided good. We identify three sources of welfare loss from decentralization: Imperfect redistribution, inter-jurisdictional free-riding, and inecient residential choice. Whereas the welfare loss from imperfect redistribution decreases and that from free-riding rises unambiguously as the publicly provided good becomes more pure, the welfare loss from the inecient residential choice depends non-monotonically on spillovers and rivalry. The equilibrium can be characterized by relative crowding of either the rich or the poor municipality. Our results imply that the characteristics of the publicly provided good are an important determinant for the welfare costs of decentralization.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Public Economics / Public Finance (Hintermann)
12 Special Collections > WWZ Publications > WWZ Discussion Papers and Working Papers
UniBasel Contributors:Kuhlmey, Florian and Hintermann, Beat
Item Type:Working Paper
Publisher:WWZ
Number of Pages:54
Note:Publication type according to Uni Basel Research Database: Discussion paper / Internet publication
Language:English
Identification Number:
  • handle: RePEc:bsl:wpaper:2019/01
Last Modified:14 Aug 2019 09:16
Deposited On:24 Jan 2019 15:32

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