The segregative properties of endogenous formation of jurisdictions with a welfarist central government

This paper examines the segregative properties of Tiebout processes of jurisdiction formation in the presence of a central government which makes equalization transfers to jurisdictions in such a way as to maximize a welfarist objective. All agents the households, the local governments and the central government are assumed to make their choices simultaneously, taking as given the choices of others. The central government is assumed to pursue a generalized utilitarian objective. The main result of the analysis is that, if the utility function used by generalized utilitarian central government is additively separable, the class of preferences that guarantees the wealth segregation of any stable jurisdiction structure is una¤ected by the presence of a central government. We are indebted, with the usual disclaiming quali…cation, to Myrna Wooders, Robert Sugden, Alain Trannoy, two anonymous referees and an associate editor for their comments and suggestions. The …rst author wishes also to ackowldedge the useful comments made by the seminar participants at the universities of Caen, York, East Anglia, Reading, Birmingham, Kent at Canterbury, Eastern Piedmont and Brunel where this paper has been presented, as well as the hospitality of the Centre de Sciences Humaines in New Delhi where part of the work leading to this paper was conducted. yMaulana Azad College, Kolkata, India and Department of Public Policy and Public Choice (POLIS), University of Eastern Piedmont, Alessandria, Italy. zAix-Marseille Univ. & AMSE, Centre de la Vieille Charité, 2, rue de la Charité, 13 002 Marseille, France. xAix-Marseille Univ. & AMSE, Centre de la Vieille Charité, 2, rue de la Charité, 13 002 Marseille, France.