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Mobility and Redistributive Politics

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  • Hindriks, Jean

Abstract

There is widespread concern that greater mobility of individuals can undermine any attempt to redistribute income at the local level. In this paper we derive the equilibrium level of redistribution when both the rich and the poor are imperfectly mobile and when each jurisdiction chooses its redistributive policy by majority voting. This leads to a fundamental interaction whereby the policy choices of jurisdictions determine whom they attract and where whom they attract determines their policy choices. Our main findings are twofold. First, we show that greater mobility of the poor can increase the equilibrium amount of redistribution. Second, we find that some jurisdictions can be in equilibrium on the "wrong" side of their Laffer curve. The reason is that the poor are in a majority in these jurisdictions and they are opposed to a potentially Pareto-improving tax reduction because it would attract the rich and shift the majority. The analysis also reveals how the interplay between policy choices and membership leads to multiple equilibria. Copyright 2001 by Blackwell Publishing Inc.

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 3 (2001)
Issue (Month): 1 ()
Pages: 95-120

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Handle: RePEc:bla:jpbect:v:3:y:2001:i:1:p:95-120

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Cited by:
  1. Puy, M. Socorro, 2007. "Skill distributions and the compatibility between mobility and redistribution," Regional Science and Urban Economics, Elsevier, vol. 37(3), pages 345-362, May.
  2. Alan Krause, 2009. "A general equilibrium analysis of the Laffer argument," Social Choice and Welfare, Springer, vol. 33(4), pages 601-615, November.
  3. Schmidheiny, Kurt, 2006. "Income segregation from local income taxation when households differ in both preferences and incomes," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 270-299, March.
  4. Lee, Woojin, 2004. "Mobility and tax competition when wages are endogenously determined," Economics Letters, Elsevier, vol. 83(3), pages 347-353, June.
  5. HAMILTON, Jonathan & PESTIEAU, Pierre, 2002. "Optimal income taxation and the ability distribution: implications for migration equilibria," CORE Discussion Papers 2002036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. John Deskins & Brian Hill, 2010. "State taxes and economic growth revisited: have distortions changed?," The Annals of Regional Science, Springer, vol. 44(2), pages 331-348, April.
  7. Haavio, Markus, 2005. "Transboundary pollution and household mobility: Are they equivalent?," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 252-275, September.
  8. Glazer, Amihai & Kanniainen, Vesa & Poutvaara, Panu, 2008. "Income taxes, property values, and migration," Munich Reprints in Economics 20449, University of Munich, Department of Economics.
  9. Alan Krause, 2007. "A Tax Reform Analysis of the Laffer Argument," Discussion Papers 07/10, Department of Economics, University of York.
  10. FIGUIÈRES, Charles & HINDRIKS, Jean & MYLES, Gareth D., 2001. "Revenue sharing versus expenditure sharing," CORE Discussion Papers 2001015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Cremer, Helmuth & Pestieau, Pierre, 2002. "Factor Mobility and Redistribution: A Survey," IDEI Working Papers 154, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003.
  12. Guggenberger, Patrik & Kaul, Ashok & Kolmar, Martin, 2001. "Efficiency Properties of Labor Taxation in a Spatial Model of Restricted Labor Mobility," IZA Discussion Papers 287, Institute for the Study of Labor (IZA).
  13. Hakan Yilmazkuday, 2011. "Intranational Trade and Regional Tax Rates: A Welfare Analysis on the U.S. Economy," Working Papers 1106, Florida International University, Department of Economics.
  14. Kessler, Anke S. & Lulfesmann, Christoph, 2005. "Tiebout and redistribution in a model of residential and political choice," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 501-528, February.

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