Heterogeneous Tiebout communities with private production and anonymous crowding

This paper provides a general equilibrium model where jurisdictions offer not only public goods, but also job opportunities. In a context of multiple types of consumers, labor complementarities, and anonymous crowding, heterogeneous populated communities form in equilibrium with an endogenous wage system that is labor-type and jurisdiction-type dependent. Equilibrium jurisdiction structures depend on the relative scarcity of labor types, unlike the situation in Berglas' (1976) partial equilibrium analysis. For a large economy, we prove that equilibrium exists and that the set of equilibria is equivalent to the core.

► General equilibrium model of societal stratification with labor complementarities. ► Jurisdictions offer public goods and job opportunities. ► Heterogeneous populated communities form in equilibrium with endogenous wages. ► Equilibrium jurisdiction structures depend on relative scarcity of labor types. ► We prove equilibrium existence (using a generalized game) and core decentralization.