Academic journal article Public Finance and Management

Contextualizing Tiebout: Mobility, Municipalities and Methodology

Academic journal article Public Finance and Management

Contextualizing Tiebout: Mobility, Municipalities and Methodology

Article excerpt

Abstract

There has recently been a resurgence of interest in fiscal mobility among policy makers in the UK and the structure of local taxation is under review. In this context Tiebout's model of fiscal mobility continues to attract interest. The key result of Tiebout's seminal paper on local public goods is well-known, but the extent to which differences in the tax-service bundle available in different localities influences residential mobility and location in practice continues to be debated. This paper revisits the issue of fiscal mobility to examine two issues. First, it considers the idea of fiscal mobility in the light of the residential mobility literature. Second, it discusses how well the idea travels and, in particular, examines the way in which the institutions and processes of local government shape the opportunities for fiscal mobility. The paper suggests that the relevance of the Tiebout model to the British, or the more generally a non-US, context has yet to be demonstrated. We also review a number of epistemological and methodological issues which, while acknowledged in the literature, have not been explored quite as extensively as they might have been. Finally, we suggest that the trajectory of the Tiebout debate raises some fundamental issues related to the philosophy of social science that warrant further investigation. We propose that approaching the debate from the perspective of a Lakatosian scientific research programme may be one potentially fruitful line of enquiry.

1. Introduction

In the half century since A pure theory of local expenditures (Tiebout, 1956) was published, as a contribution to the debate over the efficient provision of public goods, the paper has become a cornerstone of the public finance literature. The core of Tiebout's argument - that near-optimal provision and allocation of local public goods can result from consumers' making locational choices between competing local jurisdictions offering different tax-service bundles (so-called fiscal mobility) - is the starting point for most discussions of local public finance. Not only has the paper been influential in this field, but it has inspired extended debate in political science and is one of the most cited works in social science more broadly. A voluminous literature has evolved devoted to testing, critiquing, defending and refining the Tiebout model. For example, a decade ago Dowding et al (1994) were able to review some 200 empirical studies that had sought to test for Tiebout effects.

The development of the Tiebout-inspired academic literature continues apace. In addition, the model appears to exercise a continuing fascination for policy makers. In the 1980s the then Conservative UK government reviewed the way in which local government services were paid for. An initial review drew the conclusion that no alternative to the existing system of domestic property-based taxes was sufficiently superior to justify changing the system (DoE, 1981; 1983). However, shortly afterwards - following a landslide election victory - the Government revisited the issue and the green paper Paying for Local Government (DoE, 1986) heralded the arrival of the short-lived personbased community charge (the 'poll tax'). The green paper was framed very much in the language of Tiebout: it focused upon issues of transparency and accountability on the part of service providers and on reconnecting payment for services with their consumption.

The issue was placed squarely back on the agenda in 2002 when the central government department now responsible for local government in England - the Office of the Deputy Prime Minister - commissioned a review of the links between finance and non-finance elements of local government in which the Tiebout literature is briefly discussed (Kleinman et al, 2002, 28-31). The review noted that much of the literature on the Tiebout model originates in the US and concludes that the model is less relevant in the UK because the structure and funding of local authority differs significantly. …

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