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- W2000975285 abstract "Tiebout (1956) has conjectured that when public goods are local rather than pure, competitive forces tend to make local governments provide the public goods in a near-optimal manner. He hypothesized that ‘the greater the number of communities and the greater the variety among them, the closer the consumer will come to fully realizing his preference position’. In this paper, a model with potential ‘entry’ of jurisdictions is considered. In equilibrium, no firm could enter, form a new jurisdiction, and charging possibly discriminatory admittance fees, earn a positive profit. A Tiebout-type entry equilibrium with lump-sum taxes is shown to exist for all sufficiently large economies. An equilibrium jurisdiction structure and the associated lump-sum taxes are constrained only by the property that entry is unprofitable. The equilibrium is of the type suggested by Tiebout in that equilibrium states of the economy are approximately optimal and, the larger the economy and the smaller the costs of forming a jurisdiction, the closer an equilibrium is to an optimum. To characterize the Tiebout equilibrium, we develop another specific equilibrium concept, called a competitive equilibrium. In this equilibrium, agents pay Lindahl prices for the local public goods, and receive payments (possibly negative) for their effects on the production and/or consumption possibilities of the other agents. The competitive equilibrium states of the economy are Pareto-optimal. It is shown that the Tiebout equilibrium states of the economy converge to the competitive states as the economy grows large and jurisdiction formation costs, small." @default.
- W2000975285 created "2016-06-24" @default.
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- W2000975285 date "1989-08-01" @default.
- W2000975285 modified "2023-10-03" @default.
- W2000975285 title "A Tiebout theorem" @default.
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- W2000975285 doi "https://doi.org/10.1016/0165-4896(89)90068-1" @default.
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