The
Tiebout model, also known as
Tiebout sorting,
Tiebout migration, or
Tiebout hypothesis, is a
public choice theoryPublic choice in economic theory is the use of modern economic tools to study problems that are traditionally in the province of political science....
model first described by economist
Charles TieboutCharles Mills Tiebout was an economist and geographer most known for his development of the Tiebout model, which suggested that there were actually non-political solutions to the free rider problem in local governance. Graduated Wesleyan University in 1950, received PhD in economics in University...
in his article "A Pure Theory of Local Expenditures" (1956). The essence of the model is that there is in fact a non-political solution to the
free rider problemIn economics, collective bargaining, psychology, and political science, "free riders" are those who consume more than their fair share of a public resource, or shoulder less than a fair share of the costs of its production...
in local governance.
Tiebout first proposed the model informally as a graduate student in a seminar with
Richard MusgraveRichard Abel Musgrave was an American economist of German heritage. Born in Königstein im Taunus, Germany, he studied in Munich and Heidelberg. In 1937 he graduated from Harvard...
, who argued that the free rider problem necessarily required a political solution.
The
Tiebout model, also known as
Tiebout sorting,
Tiebout migration, or
Tiebout hypothesis, is a
public choice theoryPublic choice in economic theory is the use of modern economic tools to study problems that are traditionally in the province of political science....
model first described by economist
Charles TieboutCharles Mills Tiebout was an economist and geographer most known for his development of the Tiebout model, which suggested that there were actually non-political solutions to the free rider problem in local governance. Graduated Wesleyan University in 1950, received PhD in economics in University...
in his article "A Pure Theory of Local Expenditures" (1956). The essence of the model is that there is in fact a non-political solution to the
free rider problemIn economics, collective bargaining, psychology, and political science, "free riders" are those who consume more than their fair share of a public resource, or shoulder less than a fair share of the costs of its production...
in local governance.
Tiebout first proposed the model informally as a graduate student in a seminar with
Richard MusgraveRichard Abel Musgrave was an American economist of German heritage. Born in Königstein im Taunus, Germany, he studied in Munich and Heidelberg. In 1937 he graduated from Harvard...
, who argued that the free rider problem necessarily required a political solution. Later after obtaining his PhD, Tiebout fully described his hypothesis in a seminal article published in 1956 by the
Journal of Political EconomyThe Journal of Political Economy is an academic journal run by economists at the University of Chicago and published every two months by the University of Chicago Press. The journal publishes articles in both theoretical economics and empirical economics...
.
Tiebout describes municipalities within a region as offering varying baskets of goods (government services) at a variety of prices (tax rates). Given that individuals have differing personal valuations on these services and varying ability to pay the attendant taxes, individuals will move from one local community to another until they find the one which maximizes their personal utility. The model states that through the choice process of individuals, jurisdictions and residents will determine an
equilibriumEquilibrium is the condition of a system in which competing influences are balanced and it may refer to:-Mathematics:* The stationary point of a dynamical system is often called an123 equilibrium....
provision of local
public goodIn economics, a public good is a good that is non-rivalrous and non-excludable. This means, respectively, that consumption of the good by one individual does not reduce availability of the good for consumption by others; and that no one can be effectively excluded from using the good...
s in accord with the tastes of residents, thereby sorting the population into optimum communities. The model has the benefit of solving two major problems with government provision of public goods: preference revelation and preference aggregation.
The Tiebout model relies on a set of basic assumptions. The primary assumptions are that consumers are free to choose their communities, enjoying perfect
mobilityMobility is the state of being in motion.Mobility may also refer to:- In sociology :* Academic mobility, the possibility for students and teachers to move between different institutions...
and perfect information. This essentially means that they can move from community to community at no cost, and that they know everything they need to know about services provided by local governments and the tax rates of all local governments. The Tiebout model has been shown to be most accurate in suburban areas with many different independent communities. Moving between communities in these areas tends to have the lowest costs, and the set of possible choices is very diverse. In areas subject to rural flooding, Tiebout sorting explains why more affluent residents live in communities protected by river levees, while poorer residents tend to live without those expensive and rarely utilized protections.
The exact assumptions Tiebout made in his first statement of the model were:
- Mobile Consumers: Consumers are free to choose where they live. There are no costs associated with moving.
- Complete information
- Many Communities to chose from
- Commuting is not an issue
- Public Goods do not spill over of benefits/costs from one community to the next
- An optimal city size exists: Economies of scale
- Communities try to achieve "optimal size"
- Commuties are rational and try to keep the public 'bad' consumers away.