Background. Charles Tiebout (pronounced TEE-bow) received his education at a time when the supremacy of centralized government was at a. Tiebout. A pure theory of local expenditures. Journal of Political Economy 64 (October): Y: True expression of citizen. We analyze this trade-off and show that Tiebout-like sorting equilibria often In his pioneering article, Tiebout viewed the provision of local public goods.


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Ultimately, one town would be all the families with kids and the other would be all the tiebout 1956 families without kids.

Tiebout model

Assumptions[ edit ] The Tiebout model relies on a set of basic assumptions. The primary assumptions are tiebout 1956 consumers are free to choose their communities, can move freely at no cost across towns, have tiebout 1956 information, and there is equal financing of public goods.

This essentially means that they can move from community to community at no cost, and that they know everything they need to know about services provided by local governments and the tax rates of all tiebout 1956 governments.

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Further, the model requires that there be enough towns so that individuals can sort themselves into groups with similar preferences tiebout 1956 public goods. For these reasons, the Tiebout model has been shown to be most accurate in suburban areas with many different independent communities.

In areas subject to tiebout 1956 flooding, Tiebout sorting explains why more affluent residents live in communities protected by river levees, while poorer residents tend to live without those expensive and rarely utilized protections.

Lastly, the model also assumes that there are not externalities or spillover of public goods across towns. The exact assumptions Tiebout made in his first statement tiebout 1956 the model were: Mobile consumers, who are free to choose where they live.

EconPapers: A Pure Theory of Local Expenditures

There are no costs associated with moving. Many communities to choose from. Commuting is not an issue. An tiebout 1956 city size exists: Communities try to achieve "optimal size".

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Moving costs are very high see my comment on page Tiebout concedes that, as moving [transaction] costs rise, public goods provision becomes less optimal. I think that moving costs are so high that we shouldn't expect Tiebout's argument to work very well at all.

Second, he assumes that a local government's tiebout 1956 goods provision and expenditures are fixed and known. Tiebout 1956 is not true, for a reason. Since moving costs are high, people lobby their local government for change rather than simply moving to a new community with "fixed" public goods provision.

Rather than move to a new community, people will instead lobby for tiebout 1956. And if they lobby for change, we return to the quandary discovered by Musgrave and Samuelson: People do select communities to the degree that they can.

This theory ensures that municipalities do not overproduce public goods, thereby wasting valuable local resources. Tiebout assumes that there are n local public goods and there are m communities.


Each community would go to the national market and bid for appropriate units of each public good. Tiebout 1956 demand for each public good would then be the sum of demands of all the m communities for each of the n goods.