Local public good provision: Voting,peer effects,and mobility |
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Institution: | 1. Polytechnique Montréal, C.P. 6079, succ. Centre-Ville, Montréal, QC H3C 3A7, Canada;2. CIRANO, Montréal, QC, Canada;3. Department of Economics, University of Ottawa, Ottawa, ON K1N 6N5, Canada;4. School of Public Policy and Administration, Department of Economics, Carleton University, Ottawa, ON K1S 5B6, Canada;5. CESifo, Munich, Germany;1. Department of Economics, Yeshiva University, 215 Lexington Ave., New York, NY 10016, United States;2. Antai College of Economics and Management, Shanghai Jiao Tong University, 1954 Huashan Road, Shanghai 200030, China |
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Abstract: | Few empirical strategies have been developed that investigate public provision under majority rule while taking explicit account of the constraints implied by mobility of households. The goal of this paper is to improve our understanding of voting in local communities when neighborhood quality depends on peer or neighborhood effects. We develop a new empirical approach which allows us to impose all restrictions that arise from locational equilibrium models with myopic voting simultaneously on the data generating process. We can then analyze how close myopic models come in replicating the main regularities about expenditures, taxes, sorting by income and housing observed in the data. We find that a myopic voting model that incorporates peer effects fits all dimensions of the data reasonably well. |
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