While in the mainstream narrative gated communities are regarded as incidental or deviate developments, this article attempts to offer, on the basis of public choice theory, an alternative answer to the fundamental question: why are people moving to gated residential areas? Drawing on the case of Budapest, it discusses the dominant theses and concludes that eagerness for prestige seems to surpass both fear of crime and the urge for self‐segregation on the part of the affluent as the dominant motive. The search for prestige is particularly intense in Budapest, where local governments possess very weak fiscal autonomy and depend strongly on state grants, making them hardly able to provide the public goods and services that meet citizens’ preferences. Consequently, in Budapest and to some extent rather ironically, the rise of gated communities, which in the literature is vehemently disputed as a socially problematic process, has become a manifestation of the revolt of the upper middle class against a grossly overcentralized government.
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