Los Angeles offers an opportunity to examine both the positive and normative arguments for fragmented government structures. During the period from 1950 to 1970, the number of municipalities in Los Angeles County increased from 45 to 77. Most of the new cities were Lakewood Plan cities, which were able to offer minimal services through contracts with the county agencies, at little or no property tax cost due to reliance on sales tax revenue, grants, and other sources of revenue. Those individuals in the Los Angeles area who preferred this type of government, for whatever reason, suddenly had the opportunity to signal their preferences by residential relocation.
This paper offers evidence that during this period, there has been a clearly observable Tiebout-like sorting out of individuals into income and racial groups. This has been due to both the marked class and racial homogeneity of the new Lakewood Plan cities, and to the sorting out of individuals among the older cities
