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Interregional Redistribution and Mobility in Federations: A Positive Approach

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Author Info
Hansen, Nico
Kessler, Anke

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

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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  1. Kira Boerner & Silke Uebelmesser, 2005. "Migration and the Welfare State: The Economic Power of the Non-Voter?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  2. Matthias Wrede, 2006. "Uniformity Requirement and Political Accountability," Journal of Economics, Springer, vol. 89(2), pages 95-113, November. [Downloadable!] (restricted)
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