The first essay extends the theory of clubs by stating new conditions, spatially-limited altruism, under which mixed clubs are optimal. With such altruism, the nonpoor members of society care more about the poor living near them than about those living farther away. While the proximity of the poor gives mixed communities an altruistic advantage over homogeneous communities, the intermixing of rich and poor generates an efficiency loss in public consumption. As a result, a mixed community configuration may or may not be superior to a homogeneous configuration.
University of Illinois - Urbana-Champaign
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University of Illinois at Urbana-Champaign