Assessing the Importance of Tiebout Sorting: Local Heterogeneity from 1850 to 1990

Paul Rhode and Koleman S. Strumpf

American Economic Review, 2003, vol. 93, issue 5, 1648-1677

Abstract: This paper argues that long-run trends in geographic segregation are inconsistent with models where residential choice depends solely on local public goods (the Tiebout hypothesis). We develop an extension of the Tiebout model that predicts as mobility costs fall, the heterogeneity across communities of individual public good preferences and of public good provision must (weakly) increase. Given the secular decline in mobility costs, these predictions can be evaluated using historical data. We find decreasing heterogeneity in policies and proxies for preferences across (i) a sample of U.S. municipalities (1870-1990); (ii) all Boston-area municipalities (1870-1990); and (iii) all U.S. counties (1850-1990).

Date: 2003
Note: DOI: 10.1257/000282803322655482
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