Sorting by Foot: Consumable Travel-for Local Public Good and Equilibrium Stratification

This paper reexamine Tiebout’s hypothesis of endogenous sorting in a competitive spatial equilibrium setup with both income and preference heterogeneity. Agents decide endogenously the number of trips to consume a travel-for congestable local public good. We show that the equilibrium configuration may be completely segregated, incompletely segregated or completely integrated, depending crucially on the scale of local public good services, relative market rents and the underlying income/preference/local tax parameters. Segregated equilibrium may feature endogenous sorting purely by income or by both income and preferences. Multiple equilibria may arise when the equilibrium configuration is incompletely segregated.