Tiebout Equilibria in Local Public Good Economies with Spillovers

QREQAM Working Paper No. 2004-41

29 Pages Posted: 4 Jan 2005

See all articles by Francis Bloch

Francis Bloch

University of Angers - Research Group in Quantitative Saving (GREQAM); National Center for Scientific Research (CNRS)

Ünal Zenginobuz

Bogazici University - Department of Economics; Bogazici University - Center for Economic Design (CED)

Date Written: October 2004

Abstract

This paper analyzes the effects of spillovers on the formation of jurisdictions in a local public good economy with free mobility. The number of jurisdictions is fixed and spillovers are parametrized by a matrix [αij where αij ε [0,1]. When spillovers are symmetric and close to 0 or 1 (pure local public goods and pure public goods), all equilibrium jurisdiction structures are symmetric. However, any population distribution can be sustained in equilibrium for some value of the spillover parameter α. In the class of quasi-linear utility functions, we identify the unique family of utility functions for which equilibria are symmetric except for an isolated value of α. This is a class of utility functions which are linear in the public good and a power function of the private good, u(c, γ) = -A(1-c)β+ γ. With this specification of utility, we show that an increase in α results in a more fragmented equilibrium population distribution, and that when spillovers are asymmetric and large, a jurisdiction which is more centrally located (i.e. benefits more from the public goods provided in other jurisdictions) has a larger population in equilibrium.

Keywords: local public goods, spillovers, Tiebout equilibrium

JEL Classification: H41, H49, H73

Suggested Citation

Bloch, Francis and Zenginobuz, Ünal, Tiebout Equilibria in Local Public Good Economies with Spillovers (October 2004). QREQAM Working Paper No. 2004-41, Available at SSRN: https://ssrn.com/abstract=642001 or http://dx.doi.org/10.2139/ssrn.642001

Francis Bloch

University of Angers - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

National Center for Scientific Research (CNRS) ( email )

54, boulevard Raspail
Paris, 75006
France

Ünal Zenginobuz (Contact Author)

Bogazici University - Department of Economics ( email )

Bebek
Istanbul, TR 34342
Turkey
+90 212 359 65 05 (Phone)
+90 212 287 24 53 (Fax)

HOME PAGE: http://www.econ.boun.edu.tr/zobuz

Bogazici University - Center for Economic Design (CED) ( email )

Bogazici University
P.K. 2 Bebek
Istanbul, 34342
Turkey
+90 212 287 24 76 (Phone)
+90 212 287 24 53 (Fax)

HOME PAGE: http://www.ced.boun.edu.tr

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