Revisiting Tiebout's Model: A Classroom Exercise

Abstract

In this paper we use a classroom exercise to reveal the main efficiency and equity aspects of the Tiebout hypothesis. We conduct and extend the exercise developed by Brouhle et al (2005) by including a second phase in which students have the opportunity to evaluate the implications of the Tiebout model when both individual incomes and preferences are heterogeneous. By doing this, we are able to illustrate and discuss the consequences of segregation: first, in terms of efficiency, since segregation by preferences increases overall welfare and; second, in terms of equity, since segregation by income increases inequality between groups and poses a threat to equality of opportunities. Furthermore, we complement the classroom exercise with a brief questionnaire designed to gather information about the student’s rating of this sort of experience. From this, we obtain that students indeed appreciate the use of more participative means of teaching and learning, rating highly the goodness of the exercise.