LOCAL AMENITIES AND RENTS: TIEBOUT TAKES A VACATION*[link]

ABSTRACT This paper considers a two‐community model with free mobility, public expenditures set by majority voting, amenities that differ across communities, and two types of taxpayers sorting across communities according to different preferences. Residents pay local taxes, consume public services, and have the right to vote. Vacationers cannot vote, yet pay local taxes, and consume amenities. Amenities attract vacationers whose tax payments produce rents reducing the costs of public spending for permanent residents. These extractable rents produce stability in otherwise unstable equilibria. Relatively wealthy communities are generally less able than poor communities to extract rents.