Working Paper: CEPR ID: DP10758
Authors: Philippe Jehiel; Laurent Lamy
Abstract: We revisit the Tiebout hypothesis in a world in which agents may possess private information as to how they value the various public goods in the various locations, and jurisdictions are free to choose whatever mechanism to attract citizens possibly after making some investments. It is shown that efficiency can be achieved as a competitive equilibrium when jurisdictions seek to maximize local revenues but not necessarily when they seek to maximize local welfare. Limitations of the result are discussed.
Keywords: competing exchange platforms; competing mechanisms; endogenous entry; free riding; local public goods; mechanism design; Tiebout hypothesis
JEL Codes: D82; H4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| jurisdictions maximizing local revenues (H71) | efficient public good provision (H49) |
| jurisdictions maximizing local revenues (H71) | optimal citizen distribution (D30) |
| efficient public good provision (H49) | optimal citizen distribution (D30) |
| jurisdictions maximizing local welfare (H73) | presence of inefficiencies (D61) |
| excessive incentives to attract citizens (H73) | presence of inefficiencies (D61) |