A Positive Theory of Interregional Redistribution and Constitutional Choice
AbstractThe paper studies the effects and the determinants of interregional redistribution in a federation of jurisdictions among which households are mobile. Each jurisdiction controls a local redistributive policy that is democratically chosen by its residents. Paradoxical consequences of interjurisdictional transfers arise. If regions are self sufficient, they necessarily converge with respect to policies and average incomes. Horizontal transfers between jurisdictions, in contrast, lead to the divergence of regional policies and per capita incomes. Because interregional transfer schemes prevent interregional equality, however, they also allow for more interpersonal equality among the inhabitants of each region. For this reason, the voting population may in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 543.
Date of creation: Sep 1999
Date of revision:
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Interregional Transfers; Fiscal Federalism; Redistribution; Migration;
Find related papers by JEL classification:
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
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- Jean Hindriks & Gareth D. Myles, 2000.
"Strategic Inter-Regional Transfers,"
417, Queen Mary, University of London, School of Economics and Finance.
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