Transaction Costs in a Tiebout Setup

Eitan Berglas and David Pines

Annals of Economics and Statistics, 1997, issue 45, 183-197

Abstract: The paper addresses three issues related to Tiebout-type equilibrium: (a) Is the property tax a second-best instrument? (b) Given the feasible instrument menu, is a Tiebout-type allocation with profit-maximizing suppliers of the LPG constrained efficient? (c) Given the ranking of instruments, are profit maximizing developers better equipped with instruments conductive to efficiency than local jurisdictions? It is shown that the property tax is not necessarily a second-best instrument, that Tiebout-type equilibrium is constrained efficient, and that developers in the strict sense lack the second-best instruments available to local governments.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1997:i:45:p:183-197

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