sorting equilibrium in a multi jurisdiction model abstract this paper analyzes a general model of an economy with heterogeneous individuals choosing among two jurisdictions such as towns or political parties each jurisdiction is described by its constitution where a constitution is defined as a mapping from all possible population partitions into the possibly multidimensional policy space this study is the first to establish sufficient conditions for existence of sorting equilibria in a two jurisdiction model for a policy space of an arbitrary dimension

grim down south the determinants of unemployment increases in british cities in the 2008 2009 recession lee n grim down south the determinants of unemployment increases in british cities in the 2008 2009 recession regional studies this paper investigates the impact of the 2008 2009 recession on unemployment in the sixty largest cities in great britain the key determinant of changes in unemployment was the skills of the population with highly skilled cities experiencing smaller increases cities with employment in financial services or manufacturing sectors experienced larger increases in unemployment whether a city has a specialized or a diverse economy appears less important than the industries in which the city is specialized the results highlight a problem as the largest unemployment increases were in cities seen as having least potential for future growth

does the preference reversal phenomenon necessarily contradict the independence axiom one of the most puzzling paradoxes in decision theory is the preference reversal phenomenon this phenomenon seems to contradict the transitivity axiom for a long time one of the cornerstones of utility theory this paradox is established whenever a decision maker prefers lottery x to lottery y but is willing to put a lower selling price on x than on y such experiments first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 were repeated by david grether and charles plott 1979 werner pommerehne et al 1982 and robert reilly 1982 although the later researchers improved the mechanism through which the selling price emerges they all found systematic reversals a new approach to this problem was developed by charles holt 1986 and edi karni and zvi safra 1987 from two different starting points these authors showed that the preference reversal phenomenon does not necessarily prove a violation of the transitivity axiom as it may contradict the independence axiom this implies that people do not maximize expected utility but in that case the preference reversal phenomenon becomes just another evidence against expected utility theory but not against the transitivity axiom these results have their own disadvantages although the independence axiom is not as fundamental as transitivity it is nevertheless very appealing on normative grounds of course the preference reversal phenomenon necessarily contradicts at least one of the assumptions of expected utility theory but empirical evidence shows that despite its normative appeal violations of the reduction of compound lotteries axiom may happen see for example joshua ronen 1971 and doug snowball and clif brown 1979 in this paper i therefore suggest a decision mechanism for the preference reversals lotteries which is transitive and satisfies the independence axiom but not the reduction axiom

time series dynamics of us state unemployment rates this paper examines the time series properties of state and national unemployment rates based upon unit root variance ratio and cointegration tests as well as granger causality and error correction model results several important conclusions can be made first forecasting models that include only levels of unemployment rates may produce spurious regression results second in the vast majority of cases there is no long run co movement between the aggregate us unemployment rate and individual state unemployment rates third models that are specified in first differences generally yield reliable insights into state national unemployment relationships

transitory shock or structural shift the impact of the early 1980s recession on british regional unemployment this paper examines the impact of the early 1980s recession on regional unemployment in britain more specifically it seeks to evaluate the hypothesis that this recessionary shock was so severe that it caused an upward structural shift in the underlying mean unemployment rates of the regions this proposition is analysed using dickey fuller tests for difference versus trend stationarity and the augmented structural shift and trend break time series models developed by perron the results suggest that the apparent stochastic non stationarity in regional unemployment over the period 1965 95 is in fact due to an upward structural shift in regional mean unemployment rates in 1980 furthermore the nature of this shift appears to have differed as between the northern and southern regions of the country

the new pattern of regional unemployment causes and policy significance in common with most oecd countries unemployment in britain has differed significantly between regions but the persistence of relative regional unemployment rates in britain has been until recently particularly striking however during the i990 93 recession the relative regional unemployment pattern changed significantly for the first time in seventy years our primary purpose here is to understand these recent changes and to examine what might be learned about the contribution of economic policies to the amelioration of both regional unemployment rate differentials and the amplitude of regional unemployment cycles finally we ask whether there are any policy lessons to be drawn from the recent cycles in regional unemployment patterns which might provide insight into the amplitude of macro economic cycles

forward induction in the battle of the sexes games this paper provides experimental evidence on forward induction as a refinement criterion in the basic extensive form one of the two players chooses to play a battle of the sexes game or to receive a certain payoff according to forward induction choosing to play the game is a signal about intended action though the presence of the outside option changes play we find only limited support for the forward induction hypothesis the effects of the outside option also reflect the creation of a focal point through the asymmetry created by offering the outside option to one of the two players jel c72

the sensitivity of regional unemployment rates to the national trade cycle forrest d and naisbitt b 1988 the sensitivity of regional unemployment rates to the national trade cycle reg studies 22 149 153 this paper provides recent estimates for the uk of a model of regional unemployment rate variability due to thirlwall the principal findings are that regional industrial structure has continued to play a major role in determining regional unemployment variability and that the pattern of industrial variability appears to have changed little in the post war period however there remains a degree of regional specific variability which warrants further study forrest d et naisbitt b 1988 la sensibilite des taux de chomage regionaux au cycle economique national reg studies 22 149 153 cet article fournit des estimations recentes pour le royaume uni d un modele de la variation du chomage regional d apres thirlwall a partir des resultats principaux il s avere que la structure industrialo regionale ne cesse de jouer un role cle dans la determination de la variation du

tax competition and income redistribution an empirical analysis for switzerland tax competition is supposed to lead to thecollapse of the welfare state because first it willbecome difficult for a single jurisdiction to levy aredistribution tax upon the rich and mobile andsecond such a policy if undertaken in onejurisdiction will attract poor individuals from otherjurisdictions and erode internal redistributionpolicies in this paper the impact of personal incometaxes and transfers on residence decisions oftaxpayers is analyzed with swiss subfederal data therelationship of tax competition and the erosion of theswiss welfare state is tested with aggregate data onincome redistribution

the dynamics of regional unemployment in the uk 1974 89 this paper investigates the relationship between regional and national unemployment for the uk for the period 1974 1989 this problem is approached by using the time series methods of cointegration and causality tests the main conclusions are that regional and national unemployment are not as closely related as might have been supposed although any causation may as previously assumed run from the national to the regional level some regions are seen to be changing their position in the hierarchy of relative regional unemployment while most retain their relative status

the cyclical sensitivity of regional unemployment an assessment byers j d 1990 the cyclical sensitivity of regional unemployment an assessment reg studies 24 447 453 the slope coefficient obtained by regressing a regional unemployment rate on the national rate is often interpreted as a measure of the sensitivity of the regional economy to cyclical shocks in the national economy this paper discusses the procedures used to estimate cyclical sensitivity employing recent developments in econometric modelling of time series it is suggested the ols regressions actually reveal the equilibrium relationship between the two rather than the cyclical relationship byers j d 1990 la sensibilite cyclique du chomage regionale une evaluation reg studies 24 447 453 le coefficient de la pente calcule a partir d une regression du taux de chomage regional par rapport au taux national est souvent interprete comme mesure de la sensibilite de l economie regionale aux chocs cycliques dans l economie nationale cet article discute des demarches suivies afin d evaluer la

trade wars trade negotiations and applied game theory what is the value of trade negotiations quantitative measures of the value of trade liberalisation generally ignore the strategic aspects of protection policy the traditional approach is to compare welfare levels under the existing structure of protection with welfare levels under some alternative structure of protection such as unilateral or multilateral free trade we add two additional questions first in a non cooperative context are either of these points of comparison consistent with countries adopting best response policies given the policies of other countries second in the context of a cooperative negotiation are either of these points of comparison consistent with the outcome that meets certain plausible criteria for a bargaining process if the answer to either of these questions is no then the traditional approach provides at best an incomplete answer to the original question and could provide a misleading answer a simple example illustrates our basic point consider the game in table i this is a non cooperative game between the united states and ec in which each agent has just two pure strategies to do nothing and keep k the existing structure of protection in place or to abolish a trade barriers on imports from the other agent only the payoffs shown are the annual welfare impact relative to the status quo as measured by the equivalent variation ev in income in billions of i973 u s dollars the values shown are taken from the simulation results of brown and whalley i980 table i 4 p 864 what is the best response of the united states in this context if the ec decides to keep its protection structure the united states does better by also keeping its protection structure intact in other words given that the ec plays k it is a best response for the united states to also play k thus the traditional approach would imply that the united states gains from protection in this case however what is the best response of the united states if the ec decides to abolish its protection structure in this instance the united states does best by also abolishing its protection structure the point here is simply that the welfare cost of protection to the united states depends on what the ec does without saying something about what the ec will do one cannot answer our question vis a vis the united states as it happens in this particular game we

income segregation and local progressive taxation empirical evidence from switzerland this study investigates spatial income segregation in fiscally decentralized urban areas the theoretical part proposes the progressivity of local income taxes as a new theoretical explanation for income segregation the empirical part studies how income tax differentials across municipalities affect the households location decisions i use data from the swiss metropolitan area of basel that contains tax information on all moving households in 1997 the location choice of the households is investigated within the framework of the random utility maximization model different econometric specifications of the error term structure such as conditional logit nested logit and multinomial probit are compared the empirical results show that rich households are significantly and substantially more likely to move to low tax municipalities than poor households this result holds after controlling for alternative explanations of segregation social interactions and distance from the central business district are established as other major factors for income segregation households in general tend to choose locations close to other households like themselves

a regional analysis of the distribution of married women s labour force participation rates in the uk molho i i 1983 an analysis of the regional distribution of married women s labour force participation rates in the uk reg studies 17 125 134 a model analysing and conceptually simplifying the possible causes of regional variation in participation rates is constructed and contrasted with previous models of regional participation rates the model is implemented using quarterly data for married women derived from the family expenditure survey 1968 77 the major influences are found to be the unemployment rate of their husbands wage rates family structure and age structure an analysis of the causes of regional convergence in participation rates over time indicated that the trend was due to regional convergence in the unemployment rate of married males and the wage rate of married women

inducing risk neutral preferences with binary lotteries a reconsideration abstract we evaluate the binary lottery procedure for inducing risk neutral behavior we strip the experimental implementation down to bare bones taking care to avoid any potentially confounding assumptions about behavior having to be made in particular our evaluation does not rely on the assumed validity of any strategic equilibrium behavior or even the customary independence axiom we show that subjects sampled from our population are generally risk averse when lotteries are defined over monetary outcomes and that the binary lottery procedure does indeed induce a statistically significant shift toward risk neutrality this striking result generalizes to the case in which subjects make several lottery choices and one is selected for payment

non existence of equilibria in multicommunity models abstract this paper reconsiders equilibrium existence in models with migration and voting over local public goods we show that under some straightforward assumptions on preferences and income distributions the basic structure of multicommunity models i e perfect mobility majority rule single crossing property implies that no equilibrium with jurisdictions conducting different policies can exist stratification equilibria with sorting of the population according to income classes are therefore not as natural as is sometimes suggested mechanisms that can serve to support stratification i e tight housing markets returns to scale in the provision of publicly consumed goods are discussed

job loss and the regional incidence of redundancies in the current recession industrial change is a two sided process it both creates new plants production methods and jobs and displaces others at present in operation but the two sides of this process rarely coincide in time or space and in britain over the past fifteen years or so the develop ment path of the economy has been increasingly dominated by displacement effects whether measured in terms of output exports investment or employment there has been a cumulative weakening of the contribution of manufacturing to the national economy an unprecedented de industrialisation although opinions differ over the precise causes of this persistent industrial decline it is clear that the british economy has become caught in a process of declining external competitiveness which is both a consequence and a cause of a deteriorating economic environment characterised by low profits the holding back of new investment and insufficient job opportunities blackaby 1978 hughes 1981 cambridge economic policy group 1982 it is the absolute decline in industrial employ ment sustained now for some sixteen years and accelerated by the current recession that is one of the worrying features of this deindustrialisation from a peak level in 1966 total industrial employment has declined by over four million of which three million is accounted for by jobs lost in manufacturing during the 1970s there were some increases in service employment especially in the public sector which offset the decline in manufac turing jobs but that offsetting trend came to a halt towards the end of the decade over the period 1966 81 service employment increased by just over one million so that the loss of four million jobs in industry has been primarily reflected not by jobs created else where in the economy but by an increase in the army of unemployed of nearly three million industrial unemployment is now more than ten times what it was in 1966 this decline in the demand for labour has been characterised by a number of cyclical phases over the last decade or so cycles in the rate of capital accumulation appear to have become more marked and to have been accompanied by pronounced swings in the financial balance of a large number of firms and industries much of the labour displacement that has occurred during these crises has been concentrated in a single year within the four or five year cycle as in 1967 1971 1975 and in the current recession in 1980 with out doubt this latest downturn is the most severe of the post war period an economic col lapse that has been sharply intensified by the tory government s pursuance of restrictive monetarist policies to combat inflation and a laissez faire approach to the supply side of

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

the political economy of regional integration projects at borders where poor and rich meet the role of cross border shopping and community sorting abstract at borders between poor and rich countries huge service price differentials could be exploited to mutual benefit offering better paid job opportunities to the poor as well as better shopping opportunities to the rich however cross border shopping is often limited by the substantial transaction costs of crossing the border moreover countries and regions frequently fail to cut these transaction costs even when they have the opportunity to do so we provide a politico economic analysis of cross border integration projects more specifically we show how the political outcome depends on i intra country mobility ii decision making and housing ownership regimes and iii federal grants and international border regulations our analysis builds on two key characteristics in which individuals differ interregional mobility and intercultural ability

the relationship between regional and national unemployment an important issue in the analysis of regional unemployment is whether movements in regional unemployment rates reflect the impact of region specific shocks or shocks affecting the entire economy previous studies have examined this problem by considering how the regional rates move in relation to the national unemployment rate however it has to be remembered that the national rate is merely a weighted average of the regional rates in this paper we show that misleading correlation or regression results are likely to be generated by such models and that the problem can best be avoided by utilizing available information about the interactions between the regional unemployment rates directly rather than their relationship to the national rate the theoretical arguments are illustrated with simulation experiments and as a practical example we consider the relationship between regional and national unemployment in australia une question cle quant a l analyse du chomage regional c est de savoir si oui ou n

asymmetric tax competition abstract the paper analyzes nash equilibrium when two jurisdictions set tax rates on a tax base which is mobile between them population differences imply tax differences the smaller jurisdiction levies a lower tax rate in equilibrium and its residents are better off than those in the larger jurisdiction the nash equilibrium is inefficient if the two jurisdictions merged the resulting allocation would be efficient however if differences in population are great enough residents of the small jurisdiction would be made worse off by such a merger

efficient migration and redistribution abstract it has often been noted that the brain drain may be abetted by highly progressive tax systems in the regions which are likely sources for emigration by those with the most income earning potential this paper presents the case in favour of such policies the underlying assumption here is that there are productivity differences between regions and that emigration of the most skilled workers from less productive regions increases the overall value of national output the problem lies in sharing these gains with the less skilled workers left behind in the low productivity region if national governments can transfer income among regions but if the transfers cannot be targeted to particular individuals then there is a trade off between equity and efficiency generous transfers redistribute the gains but tend to impede efficient migration since prospective migrants will only emigrate if their earnings net of all fiscal transfers and net of migration costs are higher in the destination region greater tax progressivity in the source region helps relax a constraint and make the trade off less difficult

controlling preferences for lotteries on units of experimental exchange in an experimental setting when outcomes are stochastically related to actions predictions of equilibrium behavior depend not only on the participants preference orderings of outcomes but also on their orderings of lotteries on outcomes as well we introduce and test a reward structure that can be utilized in any experimental setting to allow the experimenter to decree beforehand the subjects preferences for lotteries on experimental outcomes we show analytically that the proposed reward structure can induce subjects to behave as if they have the decreed preference function defined on experimental outcomes empirical tests using two different choice settings provide evidence to support this ability to control preferences

meritocracy egalitarianism and the stability of majoritarian organizations we gratefully acknowledge support from the severo ochoa programme for centres of excellence in r d sev 2011 0075 barbera and bevia acknowledge support from grants consolidated group c eco2008 04756 and feder and sgr2014 515 ponsati acknowledges support from grants eco2012 37065 and sgr2009 1142

women in the labour markets of the london region a model of dependence and constraint this paper uses a simultaneous equations model of labour and housing market relationships in the london metropolitan region in order to illuminate some of the specific characteristics of female labour markets in an explicitly spatial context in addition to restricted female commuting fields two significant sets of spatial constraint were identified firstly the residential location of married women tended to depend on access to male not female employment opportunities and secondly limited access to owner occupation tended to restrict the residential mobility of non married women nevertheless responsiveness to local demand conditions of married women s participation rates on the one hand and non married women s migration on the other rendered local female unemployment comparatively less sensitive to employment change

evaluating the effects of employment changes on local unemployment gordon i 1988 evaluating the effects of employment changes on local unemployment reg studies 22 135 147 this paper outlines a general methodology for estimation of the effects of employment

experimental development of sealed bid auction theory calibrating controls for risk aversion we offer a brief survey of bidding theory in high price auctions of experimental studies of behavior in such auctions and of the interplay between the design and results of the experiments and efforts to further develop the theory two new series of experiments are reported the first applies a convex transformation of payoffs in an attempt to induce a lowering of subject bids as if the bidders had become less risk averse the second applies a method for inducing any prespecified utility function for risky choices on an individual we use it to induce as if risk neutral behavior both series use baseline control to calibrate the hypothesized effect of the procedures on riskaverse behavior

labor market search an experimental study the theoretical results derived from models of economic search have implications which relate to the structure and performance of labor markets utilizing a series of laboratory experiments we attempt to capture many of the features of workers search and also the conditions under which labor markets operate by varying certain of the experimental conditions we are able to determine the searchers responses to changes in the terms of unemployment insurance to the existence of a minimum wage and to different states of information about the underlying distribution of wages in most cases the behavior of the searchers is consistent with that predicted by theory

the cyclical sensitivity of regional employment and unemployment differentials gordon i r 1985 the cyclical sensitivity of regional employment and unemployment differentials reg studies 19 95 110 this paper examines inter regional variations in the cyclical sensitivity of employment and unemployment in the uk over the past thirty years it shows that the patterns for employment and for unemployment are quite different the cyclical sensitivity of unemployment is greatest in the high unemployment regions while that for employment is greatest in the more industrial regions it is argued that the primary reason for differences in the sensitivity of unemployment is not demand side factors but cyclical variations in labour mobility between regions lower mobility in periods of high unemployment reduces the effectiveness of inter regional supply adjustments and increases the variance of unemployment rates

self selection and internal migration in the united states abstract within the conceptual framework of the roy model this paper provides an empirical analysis of internal migration flows using data from the national longitudinal survey of youth the theoretical approach highlights regional differences in the returns to skills regions that pay higher returns to skills attract more skilled workers than regions that pay lower returns our empirical results suggest that interstate differences in the returns to skills are a major determinant of both the size and skill composition of internal migration flows persons whose skills are most mismatched with the reward structure offered by their current state of residence are the persons most likely to leave that state and these persons tend to relocate in states which offer higher rewards for their particular skills

tiebout and redistribution in a model of residential and political choice abstract the paper considers a two community model with freely mobile individuals individuals differ not only in their incomes but also in their tastes for a local public good in each jurisdiction the amount of public services is determined by majority vote of the inhabitants and local spending is financed by a residence based linear income tax when making their residential and political choices individuals thus face a trade off between the provisionary and redistributive effects of policies we analyze this trade off and show that tiebout like sorting equilibria often exist if the spread in tastes among individuals is very large an almost perfect sorting according to preferences emerges otherwise a partial sorting prevails and stratification into rich and poor communities is more pronounced importantly we demonstrate that all these sorting equilibria exist whether or not individuals are allowed to relocate after voting

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77

theory and misbehavior of first price auctions recent experimental evidence appears to reject simple nash equilibrium models of bidding behavior in first price auctions the author presents a methodological critique of this evidence existing tests have concentrated on deviations of subjects from predictions in the message space of the action bid deviations the author suggests that it is more natural to evaluate subject behavior in expected payoff space he concludes that the evidence against the simple models is not significant enough to warrant their rejection copyright 1989 by american economic association

interregional redistribution and mobility in federations a positive approach the paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice we find that paradoxical consequences of inter jurisdictional transfers arise if people are mobile while self sufficient regions are nec essarily identical with respect to policies and average incomes in our model interregional redistribution always leads to the divergence of regional policies and per capita incomes thus interregional redistribution prevents interregional equality at the same time however transfers may allow for more interpersonal equality among the inhabitants of each region the voting population may therefore in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence empirical evidence from panel data from oecd countries and candian provinces is consistent with the theory

income taxes property values and migration we consider the effects of income redistribution when people can migrate from one country to another and when land within each country is heterogeneous taxes related to income can then affect property values and can induce migration which further affects property values we show that under these conditions a utilitarian government should never equalize after tax incomes if migration is impossible it may even transfer income from the poor to the rich reducing the rents earned by absentee landlords the redistributive tax on the rich may be higher or lower when the rich can migrate than when they cannot a rawlsian government in the absence of mobility will equalize after tax incomes under mobility rawlsian governments cut their taxes if and only if the relative pre tax income of the poor is sufficiently low

the political geography of tax h e avens and tax hells worldwide many governments rely on personal income taxation as one of their major sources of tax revenue casual empirical evidence suggests that although most developed countries levy substantial taxes particularly on higher incomes there also exist a few countries that are characterized by no or very low income taxation a distinguishing feature of the countries in the latter group is that they are geographically very small as can be seen from table 1 which presents international income tax policies and geographical dimensions of some selected countries in the present paper we investigate whether the geography of a country is related to its pattern of taxation central to our argument is the ongoing international integration in the last decades in some cases e g in the european union the process has advanced to the point at which all formal constraints to mobility have been abandoned this development has also greatly improved the mobility of households across states or national borders in contrast to the mobility of production factors however the effects of household mobility migration are not confined to budgetary consequences as taxpayers immigrate or emigrate the inand outflow of citizens also alters policy objectives by changing the composition of the electorate in a jurisdiction at the same time migration decisions especially those of wealthy individuals are based on local tax policies consequently the migration of households determines fiscal policies through the interplay of two basic effects 1 residential choices determine tax rates through a process in which a jurisdiction s inhabitants select their local policies and 2 tax and welfare policies in each jurisdiction influence residential decisions as we argue in this paper this interdependency of residential and political decisions may provide an explanation for the stylized facts illustrated in table 1 we consider a simple framework in which households differ in incomes and national tax policies are democratically determined as a natural implication of their earning characteristics high income households ceteris paribus prefer to live in countries with low taxation for ease of exposition we refer to those countries as tax h e avens in a slight perturbation of popular nomenclature low income households in contrast are more interested in generous public spending than in low income tax rates ceteris paribus they prefer to reside in countries with large welfare programs financed by substantial taxation which we call tax hells for obvious reasons thus individual preferences imply a self selection process which leads to the segregation of households across countries according to income classes 1 if this segregation is in turn supported by a national vote for low taxes in countries where high income earners live and high taxes in countries where lower income earners live an equilibrium with tax heavens populated by wealthy residents and tax hells populated by the less affluent evolves yet the geographical size of countries plays a crucial role in this development first it affects the number of a country s inhabitants the population size because households sort hansen apax partners company possartstr 11 81679 miinchen germany kessler department of economics university of bonn adenauerallee 24 42 53113 bonn germany kessler wipol uni bonn de we thank two anonymous referees marcus berliant dennis epple christian ewerhart gerhard glomm david pines urs schweizer and participants in presentations at the university of munich the 1997 site meeting stanford the 1997 american econometric society summer meeting pasadena and the 1996 iipf congress tel aviv for helpful suggestions and discussions both authors gratefully acknowledge financial support by the deutsche forschungsgemeinschaft sfb 303 at the university of bonn remaining errors are our own the views expressed in this paper should not be attributed to apax partners company 1 the sorting of individuals by preferences across jurisdictions goes back to the famous contribution of charles m tiebout 1956 on migration as a means to reveal preferences over public goods