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The welfare costs of Tiebout sorting with true public goods

Kuhlmey, Florian and Hintermann, Beat. (2019) The welfare costs of Tiebout sorting with true public goods. International tax and public finance, 26 (5). pp. 1166-1210 .

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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 inefficient 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 inefficient 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)
UniBasel Contributors:Hintermann, Beat
Item Type:Article, refereed
Article Subtype:Research Article
Publisher:Springer
ISSN:0927-5940
e-ISSN:1573-6970
Note:Publication type according to Uni Basel Research Database: Journal article -- Additional publication or translation in: Online First
Language:English
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Last Modified:04 Sep 2019 08:44
Deposited On:05 Jul 2019 09:52

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