Working Paper No. 02-15

Do Households Vote With Their Feet?
Valeriy D. Gauzshtein and Jeffrey S. Zax
October 2002

ABSTRACT

We investigate the relationship between within-community heterogeneity in observed household characteristics and the number of local governments in a metropolitan area. One implication of the Tiebout hypothesis is that, ceteris paribus, households can more effectively sort among communities in metropolitan areas where communities are more plentiful. Therefore, communities in such metropolitan areas should be less heterogeneous with respect to the demand for local public goods. The contribution is to note that there are factors, such as geographic variations in housing prices, that cause households to stratify geographically and are unrelated to local public service levels. This stratification, referred to as "statistical sorting", implies that communities should again be more homogeneous if they contain a smaller proportion of the metropolitan population. Separate controls for the number of governments and the number of governments per capita distinguish between Tiebout and statistical sorting. They demostrate that both types occur.

JEL classification: H31, H41, R22, R23.
Keywords: household, heterogeneity, community, sorting.

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