Working Paper No. 05-04
Community Income Distributions in a Metropolitan Area
Charles A. M. de Bartolome and Stephen L. Ross
We extend de Bartolome and Ross (2003) to the case when the income distribution in the metropolitan area is a continuous distribution. In particular, we consider a circular central city surrounded by a suburban community. All households must commute to the metropolitan center and the commuting advantages of locations closer to the city center are capitalized into house prices. Our model has equilibria in which the income distributions of the central city and of the suburb do overlap. Our findings contrasts with the traditional finding of Tiebout-type models of fiscal sorting and of Alonso-Mills-Muth-type models of spatial sorting, both of which predict that the income distributions of the two communities do not overlap. In addition, it explains the fixedness in jurisdictional boundaries.
JEL classification: H73, R12, R14
Keywords: Communities, income distribution