Fiscal Impact on Intrametropolitan Residential Location: Further Insight on the Tiebout Hypothesis

Abstract

This article focuses on the degree to which fiscal variations in a metropolitan area influence intrametropolitan residential location. Efforts to explain this aspect of locational behavior have essentially resulted in the empirical testing of the Tiebout hypothesis. The theoretical model in this article ties the localfiscal sector to traditional models of residential location. Within this framework, the Tiebout hypothesis and accessibility and neighborhood factors are examined. An important conclusion from this analysis is that it is optimal for upper income households to locate in the central city under certain conditions, despite fiscal advantages and greater neighborhood amenities in the suburbs. Essentially, location becomes an "inferior" good. Significant results are also drawn from the empirical model. First, the determinants of residential location were found to vary substantially by income groups. Second, the Tiebout hypothesis may not be valid in certain types of metropolitan areas.