Tiebout Sorting and Neighborhood Stratification
Tiebout's classic 1956 paper has strong implications regarding stratification across and within jurisdictions, predicting in the simplest instance a hierarchy of internally homogeneous communities ordered by income. Typically, urban areas are less than fully stratified, and the question arises how much departures from standard Tiebout assumptions contribute to observed within-neighborhood mixing. This paper quantifies the separate effects on neighborhood stratification of employment geography (via costly commuting) and preferences for housing attributes. It does so using an equilibrium sorting model, estimated with rich Census micro-data. Simulations based on the model using credible preference estimates show that counterfactual reductions in commuting costs lead to marked increases in racial and education segregation and, to a lesser degree, increases in income segregation, given that households now find it easier to locate in neighborhoods with like households. While turning off preferences for housing characteristics increases racial segregation, especially for blacks, doing so reduces income segregation, indicating that heterogeneity in the housing stock serves to stratify households based on ability-to-pay. Further, we show that differences in housing also help accentuate differences in the consumption of local amenities.
We would like to thank Pat Bajari, Steve Berry, Tim Bresnahan, Fernando Ferreira, Caroline Hoxby, Tom Nechyba, Steve Rivkin, Jesse Rothstein, Kim Rueben, Holger Sieg, Douglas Staiger, Chris Taber, and Chris Timmins for helpful discussions about this research. Comments from editor Dennis Epple, two anonymous referees, Rajashri Chakrabarti and Rich Romano improved the paper considerably. Financial support is gratefully acknowledged from the US Department of Education, the National Science Foundation (grant SES-0137289), the Public Policy Institute of California, and SSHRC. All remaining errors are our own. The research in this paper was conducted while the authors were Special Sworn Status researchers of the US Census Bureau: thanks to Bert Grider and Arnie Reznek for all their help. Research results and conclusions expressed are those of the authors and do not necessarily reflect the views of the Census Bureau. This paper has been screened to ensure that no confidential data are revealed. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Bayer, Patrick & McMillan, Robert, 2012. "Tiebout sorting and neighborhood stratification," Journal of Public Economics, Elsevier, vol. 96(11), pages 1129-1143. citation courtesy of