Jurisdictional homogeneity and the Tiebout hypothesis

In this paper, an alternative to the capitalization approach to testing the Tiebout model is presented. The Tiebout foot voting mechanism suggests that households will sort and stratify into (approximately) homogeneous local public goods jurisdictions. At a point in time, the efficiency of the sort will be positively related to the number of existing jurisdictions. Using a measure of homogeneity introduced by Theil, the relationship between stratification (homogeneity within jurisdiction) and number of jurisdictions is tested. For a sample of school districts within 33 SMSAs, the Tiebout stratification hypothesis is confirmed.