According to the Tiebout model of fiscal federalism, a system of many local governments improves the efficiency of allocation of resources to and among public goods.

Question

BlackTom AI · Accepted Answer

Tiebout model posits that a system of many local governments, combined with mobile households, leads to efficient allocation of resources for local public goods.

1. Relevant knowledge points and concepts
- Tiebout (1956) “voting with your feet”: households sort across communities by preferences for public-good bundles and tax levels.
- Key assumptions: many jurisdictions, mobile and well-informed residents, negligible moving costs, no spillovers/externalities between jurisdictions, and communities can set taxes/expenditures.
- Efficiency here refers to Pareto efficiency in the local provision of public goods (each household is in a community whose package maximizes its utility given the tax).

2. Step-by-step reasoning
- Step 1: Each community offers a menu (tax level, public-good package).
- Step 2: Mobile households choose the community that maximizes their utility given prices (taxes) and public-good levels.
- Step 3: Because many communities exist, they “specialize” to serve different preference types; households self-sort.
- Step 4: In equilibrium, no household wants to move (the set of communities and populations is stable), meaning supply and demand for each public-good bundle match.
- Step 5: This sorting yields an allocation where local public goods are provided to those who value them most, akin to market equilibrium, so resources are allocated efficiently.

3. Calculations
- No numerical calculations are required; the argument is conceptual and equilibrium-based.

4. Why the correct answer is correct
- Under Tiebout’s assumptions, competition among jurisdictions forces communities to tailor public-good/tax bundles to resident preferences, producing a Pareto-efficient allocation of local public goods.

5. Why the other option is incorrect
- “False” would deny Tiebout’s central claim. While realistic frictions (moving costs, imperfect information, spillovers, redistribution concerns) can invalidate the result, the model itself asserts improved efficiency with many local governments under its assumptions.

6. Conclusion
- Therefore the statement is True, consistent with the Tiebout model’s conclusion.

According to the Tiebout model of fiscal federalism, a system of many local governments improves the efficiency of allocation of resources to and among public goods.判断题

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