The Political Economy of City Formation in California: Limits to Tiebout Sorting

Objective . This paper analyzes the extent to which voter behavior in city formation elections supports Tiebout's (1956) hypothesis that residential sorting facilitates efficiency of local service provision. It develops a two‐stage model of city formation to distinguish agenda setting from voter outcomes on city formation proposals. Methods . Logit analysis is used to analyze voting in 71 city formation elections, incorporating Heckman's two‐stage procedure to correct for self‐selection of local referenda. Results . Community fiscal and demographic factors influence agenda setting more than voting behavior. Wealthier communities in high‐growth counties are more likely to propose formation of a city. In contrast, community characteristics have little influence on electoral outcomes, suggesting that boundedly rational voters rely on information heuristics. Conclusions . Although reduction of diversity did not appear to motivate city formation, sorting around residential income, land use preferences, and other demographic variables may facilitate relative efficiency of service provision.