The Effects of Local Government Finances on Community Growth Rates

Abstract

The Tiebout model of residential choice suggests that people freely shop among communities seeking a "market bundle" of local government services that best fits their preferences. Presumably, the different service/tax preferences of social groups help to explain their residential location. In this research on the suburban community growth of low-and high-income population, we find that differential service levels among communities have no relationship to income specific growth rates. However, we do find that, in contrast to low-income families, high-income families cluster in suburban communities with higher fiscal resources, giving them greater policy options in choosing service levels and tax rates.