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Local Institutions and the Dynamics of Community Sorting

Robbett, Andrea (2010) Local Institutions and the Dynamics of Community Sorting. Social Science Working Paper, 1338. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper studies the dynamics by which populations with heterogeneous preferences for local public good provision sort themselves into communities. I conduct laboratory experiments to consider which institutions may best facilitate efficient self-organization when residents are able to move freely between locations. I find that institutions requiring all residents of a community to pay equal taxes enable subjects to sort into stable, homogeneous communities. However, populations can find themselves stuck at local, inefficient equilibria. Though sorted, residents may fail to attain the level of public good provision best suited for them and the system dynamics are crucial for determining whether subjects reach optimally-designed communities. When residents are able to vote for local tax policies with their ballots as well as with their feet, the inefficient local equilibria are eliminated, and each community converges to the most efficient outcome for its population.

Item Type:Report or Paper (Working Paper)
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Additional Information:Many thanks to Charles Plott, Leeat Yariv, Rod Kiewiet, John Ledyard, Jean-Laurent Rosenthal, and the Harvard Decision Science Laboratory.
Group:Social Science Working Papers
Subject Keywords:Public Goods, Group Formation, Heterogeneous Preferences, Experimental Economics, Tiebout, Local Public Expenditures
Series Name:Social Science Working Paper
Issue or Number:1338
Record Number:CaltechAUTHORS:20170726-141049380
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79431
Deposited By: Jacquelyn Bussone
Deposited On:07 Aug 2017 21:47
Last Modified:03 Oct 2019 18:20

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