Individuals effectively reveal their preferences by "voting with their feet." (Stoddard 2009). In the process of moving into these communities, a population is sorted into optimum communities based on the individuals preferences. Like any model, the Tiebout hypothesis puts forth a set of assumptions -- namely, access to complete information, free consumer mobility, many buyers and sellers, and consumer rationality. Tiebout also added the assumption that an optimal city size exists and that there are no spillovers of costs and benefits to other communities.
The hypothesis has been used to provide insights in public finance about the choices of communities for public goods (e.g., sanitation, education, public security) and how property values correlate with taxes and services that are provided. Zoning laws and regulations have also been explained by using the model. Above all, the hypothesis has had an impact on debates and decision making concerning fiscal federalism and the proper roles of central, regional, and local governments. (ibid.).
The case of a bill passed in June 2009 by the New York Senate which was aimed to ease government consolidation, may be used to illustrate the last point (See Confessore, 2009 June). The law simplifies the complex array of laws specifying "how government officials can choose to dissolve or merge towns, villages and the hundreds of special districts that provide water, sewage treatment and other services throughout the state."
The statute does not propose consolidation as such but only creates a simple, uniform process by which voters and officials can decide on and execute consolidation, requiring only that 10 percent of registered voters to propose it. It will allow county governments to abolish local government units by a majority. On the pro side, the argument is that too many layers of government have burdened residents with the highest taxes in the country, driving out