Provision of local public goods in mixed income communities

Abstract

Motivated by the success and wide implementation of the Mixed Income Housing model in the United States and other developed countries, we provide a spatial equilibrium model of jurisdiction formation to understand how jurisdictions composed of mixed-income communities provide local public goods. Individuals choose which local public good to attend on the basis of income, and there are individuals in the same location but with different income that choose different public goods at different distances. Importantly, there is an equilibrium where smaller jurisdictions are comprised of a higher proportion of poor individuals.