Subsidies as sorting devices

The divergence between tax payments and the cost of providing public services that arise from financing local public services provides an incentive for higher-income communities to deter the entry of lower-income households into their community. Here we demonstrate that higher-income households, to insure that low-income households do not enter their community or reduce the number that do enter, subsidize goods consumed by higher-income households more than by lower-income households. This strategy will make the rich community less attractive to the poor, deterring their entry to the community.