The ability of individuals to move from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake. This project looks more closely at this proposition by elaborating and applying a positive theory of income redistribution by local governments in a federal system. A model of multi-community equilibrium is developed in which the population of each community is endogenously determined and tax rates are chosen by majority vote of residents of each local jurisdiction. This model is extended and used to address such questions as: When both central and local governments redistribute, how do changes in redistribution by the central government affect the amount of redistribution done locally? How do changes in intergovernmental grants affect local redistribution? How will consolidation of local governments affect redistribution? It has been argued that the use of the property tax to finance local public expenditures provides an incentive for localities to use zoning restrictions to prevent entry by households who would pay less in taxes than the cost of the public services they consume. It is alleged that housing to serve low- and moderate- income households is not built, and housing that is built is unnecessarily costly and uses excessive amounts of land. In response to these concerns, state courts in the last decade have taken an increasingly active role in "fair share" zoning in which a locality is directed to accept its fair share of regional low- and moderate-income housing. The investigators extend their model of the conditions under which communities adopt zoning policies that prevent entry by low-income households to study how various fair share rules affect housing prices, community composition, and the types of land-use restrictions that communities adopt. This research contributes to our understanding of intergovernmental relations. It provides new insights into the way local governments respond to different political and economic institutions. It eventually will lead to a comprehensive model of U.S. federalism that can be used to explain patterns of intergovernmental grants and address timely policy issues.
