Friday, September 26, 2008

Voting with your feet

Much of public economics relies on the assumption that people vote with their feet, following the idea of Charles Tiebout (Yes, there is link on IDEAS). Yet there not been a good test of it. While there has been empirical work, the problem lies with the scale of moving. Moving is costly, especially if it implies building new social networks, finding a new job and adapting to a new culture. Few people moves because Bush got elected. More people move locally when local amenities such as schools change in quality. Typical test where at the county of census tract level, which could be too coarse.

Spencer Banzhaf and Randall Walsh manage to test Tiebout's suggestion by using California data on neighborhoods defined as sets of half-mile diameter circles. They have demographic data (useful for controls) as well as data from the Toxic Release Inventory. This allows to study the response of households as air quality changes.

And yes, households move away when the air quality deteriorates. Public economics is saved.

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