The Tiebout Hypothesis and Majority Rule: an Empirical Analysis

43 Pages Posted: 8 Aug 2012

See all articles by Dennis Epple

Dennis Epple

Carnegie Mellon University; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Thomas Romer

Princeton University - Department of Political Science; Princeton University - Woodrow Wilson School of Public and International Affairs

Holger Sieg

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 1999

Abstract

The paper provides a comprehensive empirical analysis of majority rule and Tiebout sorting within a system of local jurisdictions. The idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice. The estimator controls for both observed and unobserved heterogeneity among households, observed and unobserved characteristics of communities, the potential endogeneity of prices and expenditures as well as the self-selection of households into communities of their choice. We estimate the structural parameters of the model using data from the Boston Metropolitan Area. The empirical findings are by and large supportive of our approach.

Suggested Citation

Epple, Dennis and Romer, Thomas and Sieg, Holger, The Tiebout Hypothesis and Majority Rule: an Empirical Analysis (February 1999). NBER Working Paper No. w6977. Available at SSRN: https://ssrn.com/abstract=151588

Dennis Epple (Contact Author)

Carnegie Mellon University ( email )

Tepper School of Business
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Thomas Romer

Princeton University - Department of Political Science ( email )

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Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
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Holger Sieg

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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National Bureau of Economic Research (NBER)

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