TY - JOUR AU - Bayer, Patrick AU - McMillan, Robert TI - Tiebout Sorting and Neighborhood Stratification JF - National Bureau of Economic Research Working Paper Series VL - No. 17364 PY - 2011 Y2 - August 2011 DO - 10.3386/w17364 UR - http://www.nber.org/papers/w17364 L1 - http://www.nber.org/papers/w17364.pdf N1 - Author contact info: Patrick Bayer Department of Economics Duke University 213 Social Sciences Durham, NC 27708 Tel: 919/660-1832 E-Mail: patrick.bayer@duke.edu Robert McMillan University of Toronto Department of Economics 150 St. George Street Toronto, ON M5S 3G7 CANADA Tel: 416/978-4190 Fax: 416/978-6713 E-Mail: mcmillan@chass.utoronto.ca M1 - published as Patrick Bayer, Robert McMillan. "Tiebout Sorting and Neighborhood Stratification," in Julie Cullen and Roger Gordon, organizers, "Fiscal Federalism" Journal of Public Economics 96(11-12) (Elsevier) (2012) AB - Tiebout's classic 1956 paper has strong implications regarding stratification across and within jurisdictions, predicting in the simplest instance a hierarchy of internally homogeneous communities ordered by income. Typically, urban areas are less than fully stratified, and the question arises how much departures from standard Tiebout assumptions contribute to observed within-neighborhood mixing. This paper quantifies the separate effects on neighborhood stratification of employment geography (via costly commuting) and preferences for housing attributes. It does so using an equilibrium sorting model, estimated with rich Census micro-data. Simulations based on the model using credible preference estimates show that counterfactual reductions in commuting costs lead to marked increases in racial and education segregation and, to a lesser degree, increases in income segregation, given that households now find it easier to locate in neighborhoods with like households. While turning off preferences for housing characteristics increases racial segregation, especially for blacks, doing so reduces income segregation, indicating that heterogeneity in the housing stock serves to stratify households based on ability-to-pay. Further, we show that differences in housing also help accentuate differences in the consumption of local amenities. ER -