EQUIVALENCE OF THE CORE AND COMPETITIVE-EQUILIBRIUM IN A TIEBOUT ECONOMY WITH CROWDING TYPES

We propose a new model of a local public goods economy with differenti ated crowding. The new feature is that taste and crowding characterist ics of agents are distinguished from one another. We prove that if the economy satisfies strict small group effectiveness then the core is e quivalent to the set of Tiebout equilibrium outcomes. Equilibrium pric es are defined to depend solely on crowding characteristics. This impl ies that only publicly observable information, and not private informa tion such as preferences, is needed to induce agents to sort themselve s into efficient jurisdictions. Thus, our model allows us to satisfy B ewley`s (T. Bewley, Econometrica, 49, 713-740, 1981) anonymity require ment on taxes in his well-known criticism of the Tiebout hypothesis. ( C) 1997 Academic Press.