A Tiebout Theory of Public vs Private Provision of Collective Goods
The Journal of Public Economics
Posted: 26 May 1998
NOTE: The following is a description of the paper and not the actual abstract.
We study whether compulsory public provision or voluntary private provision of public goods can survive when individuals who "vote with their feet" can choose between communities that differ in the way that public goods are provided. We obtain the following findings: (i) an equilibrium aways exists in which all individuals migrate to the community which uses voluntary provision; (ii) under very robust conditions on preferences and income distribution, an equilibrium exists in which all individuals migrate to the community which uses coercive provision; (iii) "interior" equilibria in which collections of individuals move to both communities exist when income distribution is sufficiently polarized. Such equilibria are shown to be stratified --- richer individuals migrate to the community with voluntary provision while poorer individuals reside in the public provision community. In the case where there are two types of wealth endowments, existence of stratified equilibria seems to require a negative tradeoff between the wealth ratio of the rich to the poor and the numerical ratio of rich to poor in society.
JEL Classification: C72, D71, H41, H73
Suggested Citation: Suggested Citation