ECO 4554

Economics of State and Local Government

Core Principles

You are expected to master the core principles of the course. That means you know and
understand the principle so that you are able to state the principle, to explain it in some
detail in economic terms, and even to explain it in non-economic terms to a layman. You
will have a number of opportunities during the semester to practice and refine your mastery
of the core principles. The ultimate test of your knowledge of these principles will be the
final examination.

Topic 3 (Tiebout Hypothesis): Ceteris paribus, the level of public services provided in small,
relatively homogeneous communities where residents have similar economic characteristics
and similar tastes and preferences for public services is more efficient than the level of
services provided in larger, more heterogeneous communities where residents are more
diverse in their economic characteristics and in their tastes and preferences.