Segregation and Tiebout Sorting: Investigating the Link between Investments in Public Goods and Neighborhood Tipping

H. Spencer Banzhaf, Randall P. Walsh

NBER Working Paper No. 16057
Issued in June 2010
NBER Program(s):   EEE

Segregation has been a recurring social concern throughout human history. While much progress has been made to our understanding of the mechanisms driving segregation, work to date has ignored the role played by location-specific amenities. Nonetheless, policy remedies for reducing group inequity often involve place-based investments in minority communities. In this paper, we introduce an exogenous location-specific public good into a model of group segregation. We characterize the equilibria of the model and derive the comparative statics of improvements to the local public goods. We show that the dynamics of neighborhood tipping depend on the levels of public goods. We also show that investments in low-public good communities can actually increase segregation.

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Acknowledgments

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