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Interregional Redistribution and Mobility in Federations: A Positive Approach

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  • Hansen, Nico
  • Kessler, Anke

Abstract

The Paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice. We find that paradoxical consequences of interjurisdictional transfers can arise if people are mobile: while self-sufficient regions are necessarily identical with respect to policies and average incomes in our model, interregional redistribution always leads to the divergence of regional policies and per capita incomes. Thus, interregional redistribution prevents interregional equality. As we show, however, it at the same time allows 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 Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4576.

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Date of creation: Aug 2004
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Handle: RePEc:cpr:ceprdp:4576

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Keywords: fiscal federalism; interregional transfers; migration; redistribution;

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Cited by:
  1. Boerner, Kira & Uebelmesser, Silke, 2005. "Migration and the Welfare State: The Economic Power of the Non-Voter?," Discussion Papers in Economics 728, University of Munich, Department of Economics.
  2. Christian Lessmann, 2011. "Regional Inequality and Decentralization - An Empirical Analysis," CESifo Working Paper Series 3568, CESifo Group Munich.
  3. Georg Hirte & Christian Lessmann, 2014. "Trade, Integration, and Interregional Inequality," CESifo Working Paper Series 4799, CESifo Group Munich.
  4. Lessmann, Christian, 2009. "Fiscal decentralization and regional disparity: Evidence from cross-section and panel data," Dresden Discussion Paper Series in Economics 08/09, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  5. Christian Lessmann, 2011. "Spatial Inequality and Development - Is there an Inverted-U Relationship?," CESifo Working Paper Series 3622, CESifo Group Munich.
  6. Kessler, Anke & Lessmann, Christian, 2010. "Interregional Redistribution and Regional Disparities: How Equalization Does (Not) Work," CEPR Discussion Papers 8133, C.E.P.R. Discussion Papers.
  7. Lessmann, Christian, 2013. "Foreign direct investment and regional inequality: A panel data analysis," China Economic Review, Elsevier, vol. 24(C), pages 129-149.
  8. Christian Lessmann, 2013. "Regional Inequality and Internal Conflict," CESifo Working Paper Series 4112, CESifo Group Munich.
  9. Matthias Wrede, 2006. "Uniformity Requirement and Political Accountability," Journal of Economics, Springer, vol. 89(2), pages 95-113, November.

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