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Interregional Income Redistribution and Convergence in a Model with Perfect Capital Mobility and Unionized Labor Markets

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  • Luigi Bonatti

Abstract

The model presents a general equilibrium dynamic model of an economy consisting of many regions. Capital is perfectly mobile and labor is immobile across regions. Wages are determined by local unions. There is training on the job and strategic complementarity between investment in physical capital by firms and investment in becoming “trainable’’ by workers. Structurally similar regional economies preserve forever their differences in per capita output and employment rate, if the workers’ non-labor income is equalized across regions by interregional income redistribution operated via central budget. Regional decentralization of income redistribution allows convergence in per capita output and employment rate. Copyright Springer Science + Business Media, Inc. 2005

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  • Luigi Bonatti, 2005. "Interregional Income Redistribution and Convergence in a Model with Perfect Capital Mobility and Unionized Labor Markets," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 301-318, May.
    • Handle: RePEc:kap:itaxpf:v:12:y:2005:i:3:p:301-318
    DOI: 10.1007/s10797-005-0499-3
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    1. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 206-259.
    2. Luigi Bonatti, 1999. "Growth, real interest, employment and wage determination," Department of Economics Working Papers 9907, Department of Economics, University of Trento, Italia.
    3. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
    4. Luigi Bonatti, 2002. "Interregional income redistribution and convergence in a model with perfect capital mobility and unionized labor markets," Department of Economics Working Papers 0202, Department of Economics, University of Trento, Italia.
    5. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
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    Cited by:

    1. Guanchun Liu & Jianbo Song & Chengsi Zhang, 2022. "Fiscal transfers and economic convergence: Evidence from China," The World Economy, Wiley Blackwell, vol. 45(9), pages 2924-2949, September.

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