JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. The Econometric Society is collaborating with JSTOR to digitize, preserve and extend access to Econometrica.
The last section of this paper presents a rigorous version of Tiebout's theory of local public goods. It is shown that equilibria exist and are Pareto optimal. This rigorous theory follows closely the more rigorous part of Tiebout's work. This rigorous theory makes a number of very special assumptions which make local public goods essentially private. The body of this paper presents a series of examples, which show that if one tries to generalize the rigorous version of Tiebout's theory in a number of interesting directions, then equilibria may no longer exist or may not be Pareto optimal. The conclusion is that Tiebout's idea does not lead to a satisfactory general theory of local public goods. THE GOAL OF THIS PAPER is to point out that Tiebout's notion of equilibrium with local governments does not have the nice properties of general competitive equilibrium, except under very restrictive assumptions. Tiebout [39] suggested that there are competitive forces which tend to make local governments allocate resources in a Pareto optimal fashion. Consumers choose to live in those towns with the mix of taxes and public goods they prefer. Local governments choose this mix so as to attract inhabitants. This idea may seem intriguing, for it suggests that the invisible hand solves an important part of Samuelson's perplexing public goods problem [32]. Tiebout, in fact, makes an argument which is nearly rigorous. I give a rigorous version of his argument at the end of the paper. However in this rigorous version, so many restrictive assumptions are made that public goods become essentially private. In the body of the paper, I give a series of examples with which I try to convince the reader that one is forced to adopt Tiebout's restrictive assumptions. The idea is that if one changes any of his assumptions, then either equilibria may not exist or may not be Pareto optimal. My examples are presented in the context of a general class of Tiebout models. I consider several subclasses, one of which is the special case considered by Tiebout. In each of the subclasses except that considered by Tiebout, I give a counterexample either to the existence of equilibrium or to its Pareto optimality. The subclasses are so chosen that the difficulties they reveal would be shared by any reasonable Tiebout model which differed from his special case. I believe that my examples controvert Tiebout's suggestion [39, last paragraph] that his theory compares favorably with competitive equilibrium theory. Most of the examples in this paper have already appeared in the literature. I cite related work as I go along. What is new here is that I assemble the examples in a unified argument.
In this paper [the authors discuss] five procedures for incorporating demographic variables into theoretically plausible demand systems: translating scaling and the Gorman reverse Gorman and implicit Prais-Houthakker procedures.... These five procedures are used to incorporate a single demographic variable--the number of children in a household--into the generalized CES demand system using household budget data for the United Kingdom for the period 1966-1972 (EXCERPT)
[The theory of duality has been an extremely useful tool in the analysis of the standard models of consumer and producer behavior. This paper describes an extension of the theory to a wider class of problems of static optimization. The generalized duality theory is then applied to the integrability question in fairly general optimization models. A major gap in the comparative statics of optimization models is partially closed.]
Ce modele est principalement utilise en analyse input-output: A represente alors les echanges interindustriels de l'annee de base, u et v les consommations intermediaires totales par produit et par branche de l'annee de projection; plus generalement on peut appliquer cette methode pour desagreger des projections globales de flux positifs (importations par pays et produit, flux de transports . . ) lorsque l'on suppose une certaine stabilite structurelle. Diverses interpretations economiques des coefficients r, et s1 (qui sont en fait strictement positifs puisque u, et v; le sont aussi) ont ete avancees;1 notons toutefois que les grandeurs absolues de r et s n'ont pas de signification intrinseque, car si (r, s) est
[This paper considers the possibility of extending the Arrow-Pratt results on risk aversion to cases in which initial wealth is random. Specifically, we consider a situation in which an individual's wealth is the sum of two independent random variables extbackslashtilde\x\ and ỹ. We define the risk premium π( extbackslashtilde\x\, ỹ) which represents the reduction in mean wealth an individual is willing to accept to eliminate the random variable x̃ while retaining the random variable ỹ. It is shown that if u_1 is uniformly more (Arrow-Pratt) risk averse than u_2 and if either u_1 or u_2 exhibit nonincreasing (Arrow-Pratt) risk aversion, then extlesstex-math extgreater$ extbackslashpi _\2\( extbackslashtilde\x\, extbackslashtilde\y\)$ extless/tex-math extgreater is always smaller than extlesstex-math extgreater$ extbackslashpi _\1\( extbackslashtilde\x\, extbackslashtilde\y\)$ extless/tex-math extgreater. An example is given in which both u_1 and u_2 exhibit increasing risk aversion and in which this result fails.]