An analysis of the problems society faces in organizing itself to provide goods and services. How decisions of government, business, and the individual relate to current economic problems such as unemployment, inflation, poverty, and environmental pollution.
Theory of public goods, externalities, voting models, analysis of bureaucracy, the Tiebout model, income redistribution, intergovernmental grants.
The paper provides a comprehensive empirical analysis of majority rule and Tiebout sorting within a system of local jurisdictions. The idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice. The estimator controls for both observed and unobserved heterogeneity among households, observed and unobserved characteristics of communities, the potential endogeneity of prices and expenditures as well as the self-selection of households into communities of their choice. We estimate the structural parameters of the model using data from the Boston Metropolitan Area. The empirical findings are by and large supportive of our approach.