Tiebout Sorting Research Articles

Tiebout Sorting and Toxic Releases

Combining detailed county-to-county migration data with Toxics Release Inventory data, and fine-scale PM2.5\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$\\hbox{PM}_{2.5}$$\\end{document} concentration levels, we investigate the relationship between internal migration, income of migrant and non-migrant households and county-level differences in environmental quality. We show that households moving to “cleaner” counties are relatively “richer”—a result consistent with a sorting by income in the spirit of Tiebout (1956). An implication of this finding is that internal migration could contribute to the persistence of disparities in pollution exposure at the county-level.

Remote work and location preferences: a study of post-pandemic trends in Italy

This study investigates how working remotely, by reducing workplace commuting, weakens the limitations connected to residential mobility and enables Tiebout sorting. We focus on the Italian context, where a strong culture of in-person workplace attendance limits workers’ ability to live farther from their workplace. We leverage the natural experiment of COVID-19 containment measures to shed light on the spatial implications of an increased remote work adoption. We overcome the unavailability of official data by collecting primary data in early 2022 through an original survey of our design on a sample of workers in 12 metropolitan areas. To address the challenges of analyzing the phenomenon in a still-developing context, we ask questions on both their actual and intended moving behavior in relation to remote work availability. Using a case–control study design, we find significant evidence that expecting to work remotely more frequently in the long term increases the likelihood of being interested in moving, or having done so already since the pandemic outbreak.

Tieboutian clubs revisited

This paper examines the evolution of Tieboutian clubs over time and across metropolitan regions. We address this topic by examining a large set of socioeconomic characteristics of metropolitan regions to assess empirically whether and how those member attributes may figure into a Tiebout sorting process. The method entails factor analysis to reduce an initial set of forty-nine variables to a much smaller number of factors that represent groups of intercorrelated variables. An analysis of variance is then undertaken on the corresponding factor scores to assess whether census tracts within municipalities are more alike than those between municipalities. We do this for the Los Angeles metropolitan region using census data from 1970, 1990 and 2020, and we repeat the process for the twenty largest metropolitan regions (core-based statistical areas) in the USA for 2020. Several key results emerge from this analysis. While in most cases seven or eight factors emerge repeatedly, four are most persistent and ubiquitous; these pertain to economic class, race, age cohort and immigration status. These are, in effect, the most enduring fundamental aspects of the socioeconomic landscape in metropolitan regions in the USA. The final question addressed by our work links back to the original motivation, which is to assess the role of municipalities in the formation of these clubs. We do so for the twenty largest metropolitan regions in the USA. The results from our analyses of variance are compelling. With very few exceptions we find that census tracts with similar club characteristics have a strong tendency to be co-located within the same municipalities. This strong result holds regardless of which metropolitan region we examined, or which decade. This affirms that municipalities are indeed Tieboutian clubs.

Population growth in growing and declining cities: the role of balanced-budget increases in local government spending

Tiebout sorting describes people moving to communities that most closely match people's preferences over taxes and public services. This Tiebout equilibrium is disturbed when cities vote to increase taxes and spending. We study the effect of increased taxes and public spending on population growth in growing and declining cities. Using regression discontinuity to compare otherwise similar cities, we find increasing local government taxes and spending by 15% can increase population growth rates. The increase is only evident the year after the vote. For the general sample, the increase is 0.4 percentage points, but it is 0.8 percentage points (25% of a standard deviation) for growing cities with below-median percentages of elderly residents. In cities with declining population, passing large tax levies increases population growth rates by 0.9 percentage points the year after the vote—33% of a standard deviation. Instead of cutting taxes and services, cities with declining population might instead consider providing additional public services to stem population declines. Most migration studies use a fairly large geographical unit like states, counties, and urban areas; our study contributes to the literature by studying migration at the local government level (cities, villages, and townships).

Local Policy Choice: Theory and Empirics

This paper critically surveys the growing literature on the policy choices of local governments. First, we identify various reasons for local government policy interactions, including fiscal competition, bidding for firms, yardstick competition, expenditure spillovers, and Tiebout sorting. We discuss theoretically what parameters should be estimated to determine the reason for competition among local governments. We emphasize how the policy outcomes emerging from this competition are affected by the presence of constraints imposed by higher-level governments. Second, we integrate theoretical and empirical analyses on the effects of fiscal decentralization on mobility, spillovers, fiscal externalities, economic outcomes, and distributional issues. Third, we identify key issues that arise in the empirical estimation of strategic interactions among local governments and highlight recent quasi-experimental evidence that has attempted to identify the mechanism at work. Finally, a synthesis model, containing multiple mechanisms and fiscal instruments, resolves some puzzles and provides guidance for future research. (JEL D72,H20, H71, H72, H73, H77, R51)

Tiebout sorting with progressive income taxation and a fiscal equalization scheme

This paper develops a model of Tiebout sorting with decentrally determined progressive income taxation and a built-in fiscal equalization scheme that redistributes money from richer to poorer regions. Both aspects are central to policy makers: the progressivity for equity reasons and the fiscal equalization to prevent an underprovision of the publicly provided good and to limit the degree of segregation of households according to income. The model is calibrated to the metropolitan area of Zurich (Switzerland), and policy evaluations reveal that a progressive tax scheme as the basis for decentrally determined tax rates causes strong segregating forces that can only to some extent be compensated by the fiscal equalization scheme.

Tiebout Sorting, Zoning, and Property Tax Rates

This paper examines certain implications from the literature on Tiebout’s model of local government service provision, particularly Hamilton’s extension of the model to include local control of land use and property taxation. Our empirical analysis focused on the use of fiscal zoning to lower property tax rates, a topic that has not been addressed in the extensive literature on Tiebout’s model. Using data for over 100 municipalities in the Miami, Florida, metropolitan area, we specified property tax rates as a function of fiscal zoning measures, other municipal characteristics, and tax mimicking. We conclude that single-family zoning is by far the most important variable explaining municipal property tax rates.

Local Policy Choice: Theory and Empirics

This paper critically surveys the growing literature on the policy choices of local governments. First, we identify various reasons for local government policy interactions, including fiscal competition, bidding for firms, yardstick competition, expenditure spillovers, and Tiebout sorting. We discuss theoretically what parameters should be estimated to determine the reason for competition among local governments. We emphasize how the policy outcomes emerging from this competition are affected by the presence of constraints imposed by higher-level governments. Second, we integrate theoretical and empirical analyses on the effects of fiscal decentralization on mobility, spillovers, fiscal externalities, economic outcomes, and distributional issues. Third, we identify key issues that arise in the empirical estimation of strategic interactions among local governments and highlight recent quasi-experimental evidence that has attempted to identify the mechanism at work. Finally, a synthesis model, containing multiple mechanisms and fiscal instruments, resolves some puzzles and provides guidance for future research.

The company you keep: Satisfaction with life, economic freedom, and preference-policy mismatch

We examine the interaction between individual preferences for markets and state-level economic freedom as it relates to Satisfaction with Life (SWL). Fundamental tenets of economic freedom assert that societies free of excessive government involvement are wealthier and, ultimately, happier; individuals who are allowed to pursue self-interest are argued to be more motivated and more productive, and so society as a whole is better off. Though there is substantial empirical evidence that freer societies are wealthier, the evidence connecting economic freedom and happiness is less clear. We explore the relationship between economic freedom and SWL at the individual level. We examine differences between personal preferences for free markets and state policy and how this ‘preference-policy mismatch’ is related to SWL. We then briefly examine the relationship between preference-policy mismatches and individual self-reported voting behavior, including implications for Tiebout sorting. This study is the first to focus on individual economic ideology, i.e. individual level of support for free markets, and SWL in the United States. Combining individual and state level data we offer improvements to prior studies in a number of areas including an enhanced measure of life satisfaction, a richer basis for examining left-right differences than simple political identification, and an examination of the effect of preference-policy mismatches on satisfaction with life. We find significant relationships between SWL and individual support for markets, state-level economic freedom, and preference-policy mismatch. Further, preference-policy mismatch is positively associated with self-reported voting frequency. We find little support for Tiebout sorting.

Tiebout Sorting and Environmental Injustice

Various mechanisms could give rise to the correlations between income, race, and pollution documented by the environmental justice literature. Using a detailed county-to-county migration dataset and pollution data from the Toxic Release Inventory, we propose an approach to identify residential sorting by income as a possible source of these correlations. We find that differences in environmental quality between home and destination counties matter for households' migration decisions. We also show that households moving to cleaner counties are richer than households staying back. We interpret those results as evidence of residential sorting in the spirit of Tiebout (1956).

Local Policy Choice: Theory and Empirics

This paper critically surveys the growing literature on the policy choices of local governments. First, we identify various reasons for local government policy interactions, including fiscal competition, bidding for firms, yardstick competition, expenditure spillovers, and Tiebout sorting. We discuss theoretically what parameters should be estimated to determine the reason for competition among local governments. We emphasize how the policy outcomes emerging from this competition are affected by the presence of constraints imposed by higher-level governments. Second, we integrate theoretical and empirical analyses on the effects of fiscal decentralization on mobility, spillovers, fiscal externalities, economic outcomes, and distributional issues. Third, we identify key issues that arise in the empirical estimation of strategic interactions among local governments and highlight recent quasi-experimental evidence that has attempted to identify the mechanism at work. Finally, a synthesis model, containing multiple mechanisms and fiscal instruments, resolves some puzzles and provides guidance for future research.

The electoral migration cycle

This paper proposes a new test of Tiebout sorting that relies on the exogenous time structure of recurrent local elections. The test is based on the idea that competitive elections represent periodic perturbations to the Tiebout equilibrium of local public good provision and allocation of households to communities, so that their schedule should affect the timing of households' sorting decisions. On the other hand, internal migration flows that have nothing to do with the demand for public goods over which localities vote recurrently ought to be orthogonal to the timing of elections in a reduced-form migration equation. I exploit the staggered schedule of mayoral elections in Italy to analyze migration, elections, and public budget data across several thousands of municipalities, and find evidence of a systematic influence of the electoral calendar on the timing of sorting decisions.

The welfare costs of Tiebout sorting with true public goods

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, interjurisdictional 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.

Happy partisans and extreme political views: The impact of national versus local representation on well-being

The political party of elected officials can affect the happiness of the voting public through several different channels. Partisan voters will be happier whenever a member of their party controls political office regardless of the policies implemented. It is hypothesized that congruence between individual party identity and state politician affiliations should have a greater impact on citizen happiness than congruence with politicians at the national level due to results from the literature on Tiebout sorting. It is further hypothesized that individuals with extreme ideological views may report greater happiness as their ideology fulfills basic psychological needs for certainty and structure. Using data from the Generalized Social Survey the effect of party congruence of individuals with national and state politicians on happiness is estimated. The effect of extreme ideological political views on happiness is also estimated. Results find that congruence with presidential party affiliation has a much greater impact on happiness than congruence with national legislative affiliation, gubernatorial, or state legislative affiliation contradicting the hypothesis. Those who possess extreme political views are also found to report higher levels of happiness.

A Unified Analysis of Tiebout Models and Tax Competition Models

I construct a fiscal competition model in which immobile residents compete for mobile workers. This framework nests two influential theories, Tiebout (1956) and tax competition (Zodrow and Mieszkowski, 1986), which yield contrasting predictions on the efficiency of public goods provision in a federation. Using it, I investigate the efficiency of decentralized public goods provision from a unified perspective. When mobile workers are homogeneous, mobility does not matter for the efficiency of public goods provision, as long as policies can be differentiated between mobile and immobile residents. I also reveal the sources and the characterizations of inefficiency results in various circumstances by exploiting a unique feature of the model. Then, I introduce taste heterogeneity of mobile workers. When the heterogeneity is sufficiently large, public goods for mobile workers are efficiently provided due to Tiebout sorting. Moreover, Tiebout sorting may greatly mitigate welfare loss from 'race to the bottom' by reducing the effective number of competing jurisdictions. Several extensions are also discussed.

Happy Partisans and Ideologues: State Versus National

The political party of elected officials can affect the happiness of the voting public through several different channels. Partisan voters will be happier whenever a member of their party controls political office regardless of the policies implemented. It is hypothesized that congruence between individual party identity and state politician affiliations should have a greater impact on citizen happiness than congruence with politicians at the national level due to results from the literature on Tiebout sorting. It is further hypothesized that individuals with extreme ideological views may report greater happiness as their ideology fulfills basic psychological needs for certainty and structure. Using data from the Generalized Social Survey the effect of party congruence of individuals with national and state politicians on happiness is estimated. The effect of extreme ideological political views on happiness is also estimated. Results find that congruence with presidential party affiliation has a much greater impact on happiness than congruence with national legislative affiliation, gubernatorial, or state legislative affiliation contradicting the hypothesis. Those who possess extreme political views are also found to report higher levels of happiness.

A fragmented environmental state? Analysing spatial compliance patterns for the case of transparency legislation in China

Do Chinese cities compete for investments with lax environmental law enforcement? The here presented study suggests that this is true for some municipalities but not all of them. Based on data for 126 key environmental protection cities and regional economic hubs between 2010 and 2012 we show that economic decentralization and political centralization both shape spatial patterns of compliance with environmental transparency legislation. Our results give reason to suppose that the Chinese economy moved beyond homogenous preferences for low-cost regulatory arrangements. The emerging jurisdictional interaction is in line with a Tiebout sorting process, where cities compete with diverse factor packages to attract an optimal amount of investments.

Tiebout in the Country: The Inevitable Politics of Rural School Consolidation

This article explains why school consolidation issues are especially difficult in rural America. Consolidation is most appropriate when adjacent districts have similar preferences for taxation and spending on schools. In that case, economies of scale can be reaped without interfering much with resident preferences on taxes and school quality. In urban areas, residents signal these preferences by moving into (or out of) school districts that match their preferences, a process known as Tiebout sorting. As a result, school consolidation decisions can be based on good information about resident preferences. The basic claim of this article is that Tiebout sorting works much less well in rural areas for a variety of reasons. This means that consolidation decisions are based on thinner information; consequently, school consolidation is more contentious and in rural America. The article then argues that, given this situation, a Legislature interested in exploring rural school consolidation would do well to consider using legal and political processes that would enhance the ability of residents to express and record their preferences. Newer forms of political engagement that call on modern technology are available to do this and they may be effective in this context given the size and level of interest of the groups involved.

School spending and new construction

School districts that vote in favor of property tax levies may signal that they are education-oriented. Through Tiebout sorting and housing developer activity, new residents might move to such communities. New retail development may occur near these new residents, and office firms that rely on high-skilled residents might be drawn too. Using regression discontinuity we find school districts that renew property tax levies have a higher value of new construction than districts that do not renew these school expenditures. School tax levy renewal is responsible for 14% of new residential construction and 25% of new commercial construction.

Differential Income Taxation and Tiebout Sorting

This study examines optimal nonlinear income taxes when individuals differ in their preference for a public good and labor productivity. We consider two regions, of which one provides a higher-quality public service than the other, thus inducing individuals to vote with their feet. The government implements a region-specific income tax schedule to reflect the difference in benefits from the public service between the regions in the tax system. We demonstrate that the optimal structure of the tax system is dramatically reformed, depending on whether individuals can move or not.