Residents of two districts, Oz and Wonderland, initially fall into two types: blue (B) and red (R). In Oz, there are 500 blue residents and 1000 red residents, while in Wonderland there are 1000 blue residents and 500 red residents. Blue residents earn a regular passive income of Yg 12,000, while red residents' passive income is YR = 2,000 due to their lower initial endowments. Both districts provide a local public good for their residents, G. Utility is given by V₁ = 4Y (G+¹)-G² for i= B, R. The cost of the local public good per resident is C = 23G-8, everywhere. Provision of this good takes place at the local government level, with the amount of provision chosen by majority vote within each district. (d) Critically discuss the efficiency of the Tiebout equilibrium allocation of local public goods in general, with reference to i) the necessary theoretical conditions, and ii) the empirical record.

Residents of two districts, Oz and Wonderland, initially fall into two types: blue (B) and red (R). In Oz, there are 500 blue residents and 1000 red residents, while in Wonderland there are 1000 blue residents and 500 red residents. Blue residents earn a regular passive income of Yg 12,000, while red residents' passive income is YR = 2,000 due to their lower initial endowments. Both districts provide a local public good for their residents, G. Utility is given by V₁ = 4Y (G+¹)-G² for i= B, R. The cost of the local public good per resident is C = 23G-8, everywhere. Provision of this good takes place at the local government level, with the amount of provision chosen by majority vote within each district. (d) Critically discuss the efficiency of the Tiebout equilibrium allocation of local public goods in general, with reference to i) the necessary theoretical conditions, and ii) the empirical record.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

ChapterA: The Use Of Mathematics In Principles Of Economics

Section: Chapter Questions

Problem 3RQ: Exercise A3 What dome slices of a pie chart represent?

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