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Tiebout Sorting

Tiebout sorting refers to the sorting of households into neighborhoods and communities according to their willingness and ability to pay for local public goods (tax-supported amenities and services—such as K-12 education—provided to residents of a local jurisdiction). In theory, sorting results in an efficient provision of public goods as local governments compete to provide desired services at a price residents are willing to pay (via housing costs and property taxes), and households choose communities that fit their preferences for public services, housing, and taxes. This entry introduces the economist Charles Tiebout’s hypothesis about the effects of residential sorting and its implications for policy. It lays out key assumptions and predictions of the theory and highlights recent empirical tests of these. It concludes by describing how ...

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