Local Residential Sorting and Public Goods Provision: A Classroom Demonstration
This classroom exercise illustrates the Tiebout (1956) hypothesis that residential sorting across multiple political jurisdictions leads to a more efficient allocation of local public goods. The exercise places students with heterogeneous preferences over a public good into a single classroom community. A simple voting mechanism determines the level of public good provision in the community. Next the classroom divides in two, and students may choose to move between the two smaller communities, sorting themselves according to their preferences for public goods. The exercise places a cost on movement at first, then allows for costless sorting. Students have the opportunity to observe how social welfare rises through successive rounds of the exercise, as sorting becomes more complete. One may also observe how immobile individuals can become worse off due to incomplete sorting when the Tiebout assumptions do not hold perfectly.
This version: May 2003