Local government tax and service policies, for reasons including tax competition, spillovers of service benefits, and a limited choice of tax instruments, may not be globally efficient. Policies used by state governments to remedy these inefficiencies include matching grants, mandates, and tax...

Beginning with Tiebout (1956), numerous studies have argued that we should expect to see differences in public services among localities as a result of people "voting with their feet". Here, we consider differentiation in public services as a way of reducing competition among localities...