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American Economic Review Vol. 98 No. 3 2008

Do People Vote with Their Feet? An Empirical Test of Tiebout's Mechanism

H. Spencer Banzhaf1; Randall P. Walsh2

1 Department of Economics, Georgia State University, PO Box 3992, Atlanta, GA 30302. · 2 Department of Economics and Institute of Behavioral Sciences, University of Colorado at Boulder, 256 UCB, Boulder, CO 80309.

Abstract

Charles Tiebout's suggestion that people “vote with their feet” for communities with optimal bundles of taxes and public goods has played a central role in local public finance for over 50 years. Using a locational equilibrium model, we derive formal tests of his premise. The model predicts increased population density in neighborhoods experiencing exogenous improvements in public goods and, for large improvements, increased relative mean incomes. We test these hypotheses in the context of changing air quality. Our results provide strong empirical support for the notion that households “vote with their feet” for environmental quality.

DOI
10.1257/aer.98.3.843
Volume
98
Issue
3
Pages
843-863
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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