Working Paper: NBER ID: w6977
Authors: Dennis Epple; Thomas Romer; Holger Sieg
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.
Keywords: Tiebout Hypothesis; Majority Rule; Public Good Provision; Residential Choice
JEL Codes: C51; H31; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| majority rule (D72) | level of public good provision (H42) |
| community preferences (D71) | expenditure levels (H59) |
| self-selection of households (R21) | non-random sample (C83) |
| household preferences (D12) | observed public expenditures (H59) |
| income levels (J31) | public good provision (H42) |