TIEBOUT Meaning and
Definition
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Tiebout refers to the term coined by economist Charles Tiebout to describe a theoretical model of public finance and local public goods provision. The Tiebout model assumes that individuals have the ability to freely choose the local government jurisdiction they desire to reside in, taking into account their preferences for public goods and the level of taxation.
In this model, a Tiebout economy is constituted by a number of jurisdictions, each of which competes to attract residents by offering different bundles of public goods and tax rates. Individuals face a horizontal demand curve for local public goods reflecting their preferences and willingness to pay for these services. They exercise their mobility rights to sort themselves across jurisdictions that best align with their preferences. Residents choose the jurisdiction that maximizes their utility considering the trade-off between public goods provision and taxation.
The Tiebout model suggests that this process of voluntary migration and selection leads to an efficient allocation of individuals in different jurisdictions, where they are matched with the local public goods bundle and taxation level that best satisfies their preferences. Since people foot the cost of public goods directly through taxation, Tiebout hypothesized that this model would help overcome fiscal mismanagement and capture local inefficiencies. Moreover, competition among jurisdictions would promote better governance, offering individuals a greater diversity of choices.
It is important to note that the Tiebout model serves as a fundamental concept in the field of public economics and provides insights into the benefits of decentralized decision-making and individual choice in local public goods provision.
Common Misspellings for TIEBOUT
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