Tiebout Model

Definition

The Tiebout Model is an economic theory that explains how individuals 'vote with their feet' by choosing to move to different jurisdictions based on the public goods and services offered by those areas. This model emphasizes the importance of competition among local governments in providing optimal levels of public goods, suggesting that individuals can select communities that best match their preferences for taxation and public service levels.

5 Must Know Facts For Your Next Test

1. The Tiebout Model posits that individuals will relocate to communities that provide their preferred mix of taxes and public services, creating a form of local government competition.
2. This model assumes that residents have perfect knowledge of the options available to them and can freely move between jurisdictions without barriers.
3. The Tiebout Model suggests that fiscal decentralization can lead to improved efficiency in the provision of public goods, as local governments respond to the preferences of their residents.
4. One key implication of the model is that differences in public goods provision across jurisdictions can lead to income stratification, as wealthier individuals may move to areas with better services.
5. The Tiebout Model has been influential in urban economics, providing insights into how local governance affects community choices and regional development.

Review Questions

• How does the Tiebout Model illustrate the relationship between local governance and individual choice?
  • The Tiebout Model illustrates that local governance is closely tied to individual choice by demonstrating how residents select communities based on their preferences for taxes and public services. This relationship shows that individuals 'vote with their feet,' moving to jurisdictions that align with their desired level of public goods. As a result, local governments must compete to attract residents, which can lead to more efficient allocation of resources and better public services tailored to community needs.
• In what ways does fiscal competition among jurisdictions influence the efficiency of public goods provision according to the Tiebout Model?
  • Fiscal competition among jurisdictions influences the efficiency of public goods provision by incentivizing local governments to offer attractive combinations of taxes and services. According to the Tiebout Model, when governments compete for residents, they must tailor their offerings to meet diverse preferences, leading to a more efficient allocation of resources. This competitive environment encourages innovation and responsiveness in local governance, ultimately resulting in a better match between public goods provided and community demands.
• Evaluate the implications of the Tiebout Model for understanding income stratification within urban areas and its impact on social equity.
  • The Tiebout Model has significant implications for understanding income stratification within urban areas, as it highlights how individuals’ choices regarding where to live can create disparities in access to quality public goods. Wealthier individuals may migrate to jurisdictions with better services, which can exacerbate inequalities and limit social mobility for lower-income residents who may not have similar options. This phenomenon raises important questions about social equity, as it challenges the idea that all communities can provide equal access to essential services, potentially leading to segregated neighborhoods based on socioeconomic status.

Related terms

Public Goods: Goods that are non-excludable and non-rivalrous, meaning that one person's consumption of the good does not diminish its availability to others.

Fiscal Competition: The competition between jurisdictions to attract residents and businesses through favorable tax policies and public services.

Decentralization: The distribution of authority and responsibility from central government to local governments, allowing for more localized decision-making.