a dynamic tiebout theory of voluntary vs involuntary provision of public goods this paper considers a dynamic model of tiebout like migration between communities that utilize distinct allocation procedures for public goods at issue is whether voluntary or compulsory procedures are more likely to prevail over time we model infinitely lived individuals who make repeated sequential location decisions over one of two communities each community uses a distinct mechanism for allocating public goods the first is one in which contributions are given voluntarily by the citizenry of the community the second is a compulsory scheme by which individuals are taxed proportionately to wealth with the tax determined by a majority vote opportunities to accumulate wealth exist via accumulation of public capital the markov perfect equilibria of the dynamic game are studied our main result shows that when accumulated wealth converges to a steady state individuals locational choices eventually select the involuntary provision mechanism this holds despite the fact that unanimous location in the voluntary provision community may in many cases remain as a nash equilibrium of the static game each period we also describe conditions under which voluntary provision survives these conditions require that accumulation of capital fails to decrease wealth dispersion over time the results are shown to be consistent with findings relating inequality to school choice

a tiebout theory of public vs private provision of collective goods abstract we study whether coercive public provision or voluntary private provision of public goods can survive when individuals who vote with their feet can choose between communities that differ in the way that public goods are provided we obtain the following findings i an equilibrium always exists in which all individuals migrate to the community which uses voluntary provision ii under very robust conditions on preferences and income distribution an equilibrium exists in which all individuals migrate to the community which uses coercive provision iii interior equilibria in which collections of individuals move to both communities exist when income distribution is sufficiently polarized such equilibria are shown to be stratified richer individuals migrate to the community with voluntary provision while poorer individuals reside in the public provision community in the case where there are two types of wealth endowments existence of stratified equilibria seems to require a negative trade off between the wealth ratio of the rich to the poor and the numerical ratio of rich to poor in society

exclusion and moral hazard the case of identical demand abstract this paper examines the problem of costly exclusion of individuals from a public good previous analyses of exclusion have treated it as solely a question of technologies in our analysis exclusion depends on technology and incentives in this paper providers of the good design a mechanism to provide an optimal level of deterrence to free riders if individuals are heterogeneous optimal deterrence may allow some free riders we examine the effect of costs of exclusion on the samuelson condition for optimal provision and see that the desire to deter free riding leads to underprovision of the good irrespective of the degree of rivalry of the good

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

denomination composition of trade and trade balance evidence from turkey the currency denominations of a country s exports and imports are not necessarily the same if this is the case then a change in the exchange rate parity among major currencies will affect the trade balance the empirical evidence provided from turkey where exports are mostly denominated in euros and imports are mostly denominated in usd suggests that an appreciation of the euro against the usd would increase the output in the long run appreciate the local currency and improve the trade balance for the 1985 01 2003 07 period

housing markets with indivisibilities abstract a model of a rental housing market in which houses are treated as indivisible commodities is presented a recursive equation that determines a competitive equilibrium is provided and it is argued that this competitive equilibrium is representative of the set of all competitive equilibria using this representative equilibrium several propositions on comparative statics are considered that have to do with how the competitive rents change when certain parameters of the model change

equilibrium in a finite local public goods economy abstract this paper examines the existence of a noncooperative equilibrium in a finite local public goods economy where consumers have quasi linear preferences jurisdictions consist of consumers who chose the same public project and finance the cost of production of public goods through either a proportional income tax or a poll tax we show that under a proportional income tax scheme a nash equilibria may fail to exist under a poll tax scheme an equilibrium always exists but in general nash equilibria violate a very weak efficiency condition we conclude by commenting on the stabilizing effect of zoning policies journal of economic literatureclassification number c71

on price taking equilibria in club economies with nonanonymous crowding abstract competitive equilibrium in a coalition production economy or a club economy typically does not exist when there is free entry for two reasons first there may be an integer problem as is familiar from club theory with anonymous crowding second optimal groups may have different compositions from the population and then even if there is no integer problem it may be impossible to partition the population into optimal groups i define a notion of approximate equilibrium and show that such an equilibrium always exists in a sufficiently large economy i focus on the optimal size of the economy rather than of clubs

redistribution and administrative federalism in this paper redistribution is studied in the presence of migration externalities administrative federalism is defined as a constitution where statutory tax and transfer levels are set nationally while local administrations may refuse to pay the transfer or rebate the tax in single cases thereby introducing horizontal inequity with risk aversion this is less attractive than reducing the level of redistribution in a horizontally equal way it is shown that administrative federalism leads to higher transfers and higher utilitarian welfare than decentralized decisions that it may implement the first best solution and that horizontal inequality never occurs in equilibrium

quantities qualities and multiple public services in the tiebout model abstract this paper introduces a new more realistic characterization of local public services this characterization fits education parks and streets none of which are a pure samuelsonian good it is shown that tiebout s hypothesis holds for this new type of services provided correct user charges are adopted introducing several local services considerably affects the results the paper emphasizes the difference in tastes with regard to quality as opposed to quantity earlier literature is shown to apply to the role of quality and ignores the role of quantity the effect of the latter makes mixed communities more efficient than segregated ones it is shown that efficient allocation with mixed communities is an equilibrium in a costless mobility tiebout type setting

competitive equilibrium and the core in club economies with anonymous crowding in club economies with anonymous crowding competitive equilibrium states of the economy are efficient and coincide with the core when there is only one private good anonymous admission prices permit consumers with different tastes to share facilities consumers might do so when their demands for facility size and crowding coincide in which case sharing is efficient thus similarity of demands is the relevant consideration for efficiently grouping consumers with different tastes

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide 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 observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and 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 reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

price specification and the demand for public goods abstract nearly all public expenditure demand studies define the marginal price for publicly provided goods as the household s share of the local property tax burden or what is often called the tax price such a definition is at odds with two familiar facts taxes are ordinarily distortionary and property values are often influenced by the value of local services this paper constructs a theoretically consistent marginal tax price measure incorporating these considerations the new measure demonstrates that previous estimates of the price and income elasticities of demand for public services are biased except under very restrictive circumstances moreover the direction of this bias will depend upon the actual incidence of public spending and the tenure status of residents

educational vouchers and cream skimming educational vouchers and cream skimming epple and romano 1998 show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most able students and universal vouchers lead to further cream skimming here we study voucher design that injects private school competition and increases technical efficiencies without cream skimming conditioning vouchers on student ability without restriction on participating schools policies fails to affect significantly cream skimming however by adding restrictions like tuition constraints such vouchers can reap the benefits of school competition without increased stratification this is accomplished while allowing voluntary participation in the voucher system and without tax increases

when is efficiency separable from distribution in the provision of club goods abstract using the homogeneous of degree zero inverse congestion quality function employed most frequently in the literature we characterise completely the families of utility functions which are then necessary and sufficient for break even utilitarian welfare maximising provision of club goods with self selection to be separable from distribution two types of separation involving alternatively a the price and quality b the price quality facility size and total utilisation are considered when separation is possible utility functions and optimal decisions take simple intuitive forms our results extend the scope of separation results previously obtained only for pure public goods journal of economic literature classification numbers d62 h23 h40

clubs local public goods and transportation models a synthesis abstract clubs local public goods and transportation models are analyzed within a unified model the emphasis is on the derivation of optimal allocation pricing and the size of the sharing group we derive the conditions under which optimal prices will yield surplus or deficit as well as those under which competitive provision will be efficient given heterogeneous tastes we prove that segregation according to tastes is generally efficient although several cases where this result does not hold are also discussed we show that the existing literature is unnecessarily restrictive and that the unified approach suggested here considerably extends the existing analysis of clubs local public goods and the transportation problems

the persistence and inefficiency of property tax finance of local public expenditures abstract i both characterize and evaluate equilibrium outcomes in multiple jurisdiction economies with property and land taxation but where direct taxation of residents is not possible the model contains perfectly mobile capital and population and competitive entrepreneurial governments that choose local taxes and expenditures to maximize after tax land rent when the cost of public goods is proportional to population the property tax emerges as the sole source of local finance even though the land tax has no deadweight loss it is shown that equilibria are not constrained efficient in general hence decentralized decision making is not consistent with the best use of the available tax instruments

profit maximizing clubs abstract we study a nash equilibrium among profit maximizing clubs which choose facility size and admission price the number of clubs is endogenous entry is deterred whenever the symmetric nash equilibrium with one additional firm would yield negative profit equilibrium exists with positive profit the equilibrium price is higher than the congestion price and the equilibrium number of clubs is bounded below by one fewer than the efficient number in general there will be too much entry than too little one can choose an economy sufficiently large that the equilibrium price is within epsilon of the competitive price

ability tracking school competition and the distribution of educational benefits abstract to study the effects of ability grouping on school competition we develop a theoretical and computational model of tracking in public and private schools we examine tracking s consequences for the allocation of students of differing abilities and income within and between public and private schools private schools tend to attract the most able and wealthiest students and rarely track in equilibrium public sector schools can maximize attendance by tracking students public schools retain a greater proportion of higher ability students by tracking but lose more wealthy lower ability students to the private sector consequently socioeconomic status is a predictor of track assignment in public schools for the entire population public sector tracking has small aggregate effects on achievement and welfare but results in significant redistribution from lower to higher ability students

club theory thirty years later this paper presents a self contained survey of club theory with an emphasis on the contributions of the last fifteen years club goods are contrasted with pure public goods and equilibrium and optimality notions are contrasted after presenting three basic representations of club theory we focus on recent advances and generalizations that include heterogeneous memberships transaction costs uncertain utilization asymmetric information and noncompetitive influences an agenda for research is indicated that includes further analysis of asymmetric information institutional structure and applications

do local governments use their tax bases efficiently abstract this paper analyzes an economy with multiple governments and with mobility of individuals across jurisdictions where each government is constrained to raise revenue for public expenditures using distortionary taxes a government is said to be competitive if the total benefits and costs of its decisions including the excess burden are perceived to be internalized the competitive equilibrium allocations are not constrained efficient in general there exists another set of distortionary taxes and public expenditures such that when private sector behavior adjusts to maintain equilibrium all individuals in the economy are better off thus competitive decentralized decision making does not lead to an efficient use of the available tax instruments it is also shown that the source of the failure can be interpreted as a missing market and the form of the best decentralized remedy which involves pricing the tax base is derived

the dynamic impacts of monetary policy an exercise in tentative identification it is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate these assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses this paper tentatively identifies supply and demand shocks in the markets for reserves and m2 for the 1980s and contrasts them with results for the 1970s in the later period identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses

entrepreneurial land developers joint production local externalities and mixed housing developments abstract housing developments condos and suburban developments are not necessarily homogeneous developers provide different types of units of various sizes and other characteristics catering to different types of customers in this paper we allow joint production and local consumption externalities within each development and show that land developers who seek a profit maximizing set of units in developments may provide mixed developments we show that there exists an equilibrium and that every equilibrium is pareto efficient we provide examples in which mixed developments arise in a long run equilibrium we relate this work to a widely used hedonic pricing model by rosen 1974 and to an equilibrium concept under asymmetric information by rothschild and stiglitz 1976

municipal preferences for state imposed amalgamations an empirical study based on the swedish municipal reform of 1952 this paper concerns municipal preferences for state imposed municipal amalgamations focusing on factors that may explain municipal acceptance of or objection to a state imposed amalgamation deci

resurrecting the weak credibility hypothesis in models of exchange rate based stabilization abstract we analyze how weak credibility affects the volatility of consumption spending in a model of exchange rate based stabilization that allows for both durable and nondurable goods the inclusion of durables greatly improves the explanatory power of the weak credibility hypothesis the hypothesis can account for the main qualitative properties of the boom bust cycle provided the elasticity of durables expenditure with respect to tobin s q is greater than the intertemporal elasticity of substitution moreover the quantitative effects are very large in numerical simulations based on conservative assumptions about the expenditure share of durables 20 and wealth effects none aggregate consumption increases 17 22 and the real exchange rate appreciates 24 26 when the crawl decreases from 100 to zero for 3 years in variants of the model that incorporate supply effects the consumption boom is equally strong but appreciation of the real exchange rate rises to 30 40

two tier pricing of shared facilities in a free entry equilibrium we explore how well the market will provide shared facilities which are subject to congestion it is usually efficient to have multiple facilities because it is more efficient to spend resources on facilities than to endure crowding costs we assume firms can charge a membership price and a visit price we present a symmetric nash equilibrium in these two prices we show that ifthe number offirms is large the membership price will be small thus the membership price is a measure of market power when entry occurs in response to positive profit but such that entry is deterred by the prospect of negative profit in a symmetric nash equilibrium the endogenous number offirms is bounded below by one fewer than the efficient number thefees paid by a client converge to an appropriately defined competitive price as the economy is replicated

identifying monetary policy in a small open economy under flexible exchange rates abstract previous empirical study on the effects of monetary policy shocks in small open economies has generated puzzling dynamic responses in various macroeconomic variables this paper argues that these puzzles derive from an identification of monetary policy that is inappropriate for such economies to remedy this it is proposed that a structural model be estimated to explicitly account for the features of the small open economy such a model is applied to canada with tightly estimated results overall the dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the exchange rate as a transmission mechanism

assessing the impact of nigeria s naira depreciation on output and inflation empirical evidence in support of the argument that keeping real exchange rate persistently devalued may lead to a permanent higher level of inflation have been provided kamin 1985 calvo et al 1994 however probably because of the relatively recent origin of serious exchange rate depreciation in sub saharan africa countries especially nigeria when compared with other regions e g latin america and asia not many studies have been reported on the subject the existing studies on effect of persistent exchange rate depreciation in nigeria are based on either regression or simulation approach rather than var approach this present study intends to fill these gaps by not only focusing the study on nigeria but also adopting restricted vector autoregressive model thereby providing basis for comparison with existing results obtained for other countries this abstract was borrowed from another version of this item

on the dynamic selection of mechanisms for provision of public projects abstract how do individuals spatial decisions affect the institutions for public goods provision over time this paper describes a dynamic model in which the provision mechanism for a public project is itself the object of locational choice of individuals individuals in an ongoing society must choose between a location with a majority rule mechanism and one with a voluntary contribution mechanism each mechanism determines a funding decision for a local public project which is repeated over time generations of individuals asynchronously supercede their parents creating an entry exit process that allows individuals with possibly different beliefs to enter society a self confirming equilibrium sce belief process describes an evolution of beliefs in this society consistent with a self confirming equilibrium fudenberg and levine 1993 of the repeated location provision game it is shown that the process with belief mutation as new individuals enter society results in a globally absorbing state in which the majority rule mechanism is the unique survivor of the two

local government structure and urban residential location the large research literature on the tiebout model has developed with little attention paid to the urban economic structure in which local government functions this paper attempts to examine the theoretical consequences of local jurisdictions functioning within a conventional monocentric urban model it also discusses a mathematical formulation of a two jurisdiction linear city in which the local service level and local property tax rate might be used as strategic variables in a game theory sense it is concluded that for this to happen the local service level has to have more than one element which is intuitively appealing some references are developed to current british local government and possible changes

clubs and the market large finite economies abstract this paper builds a general equilibrium model of finite economies with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of other club members because club memberships are indivisible and choices of club memberships must be coordinated across the population the core of such an economy may be empty and equilibrium may not exist however for large finite club economies an approximate core is not empty and states in this approximate core can be approximately decentralized by prices for private goods and for club memberships the arguments use convexification tools familiar from the literature on private goods economies and a new tool of some independent interest that addresses the special problems created by the nature of club memberships journal of economic literature classification numbers d2 d5 h4

efficiency equilibrium and exclusion when the poor chase the rich using a simple adverse selection model we characterize equilibrium when the rich chase the poor if communities are established by competitive entrepreneurs the equilibrium exists is unique and is efficient it involves either complete separation or complete pooling different income groups may rank these qualitative outcomes differently we show how restrictions imposed by a central government may alter the nature of equilibrium such restrictions may be explained as the choice of a low income majority altering the equilibrium to the pooling outcome which they prefer

clubs and the market this paper defines a general equilibrium model with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of the other members of their clubs the space of agents is a continuum but clubs are finite it is shown that i competitive equilibria exist and ii the core coincides with the set of equilibrium states the central subtlety is in modeling club memberships and expressing the notion that membership choices are consistent across the population

equivalence of the core and competitive equilibrium in a tiebout economy with crowding types abstract we propose a new model of a local public goods economy with differentiated crowding the new feature is that taste and crowding characteristics of agents are distinguished from one another we prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of tiebout equilibrium outcomes equilibrium prices are defined to depend solely on crowding characteristics this implies that only publicly observable information and not private information such as preferences is needed to induce agents to sort themselves into efficient jurisdictions thus our model allows us to satisfy bewley s 6 anonymity requirement on taxes in his well known criticism of the tiebout hypothesis

effects of usd euro parity on a small open economy evidence from turkey this study assesses the effect of usd euro parity on a small open economy where exports are predominantly denominated in euros and imports are denominated in usd empirical evidence from turkey suggests that a positive change in the usd value of the euro appreciates the local currency decreases inflation and increases output

a tiebout tax competition model abstract this paper analyzes a tiebout tax competition model where heterogeneity of consumer preferences is introduced into a standard tax competition framework following the modern tiebout tradition consumer sorting in the model is achieved through the activities of profit maximizing community developers once sorting is achieved the equilibrium is equivalent to that in a standard tax competition model with immobile but heterogeneous consumers a principal lesson of the analysis is that under capital taxation consumers with high public good demands are worse off than under a head tax regime in pursuit of high levels of public spending high demand communities impose high tax rates which drive away capital the analysis also establishes a number of other results