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Mobility and Redistributive Politics

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  • Hindriks, J.

Abstract

There is a widespread concern that a 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 mobile (although in different degrees) and when each jurisdiction chooses its redistributive policy by majority voting. This leads to a fundamental interaction whereby the policy choices of jurisdictions determine who they attract, and who they attract determines their policy choices. Our main findings are twofold. First, we show that a greater mobility of the poor can increase the equilibrium amount of redistribution. Second, we find that some jurisdictions can be stuck in equilibrium on the RwrongS side of their Laffer curve. The reason is that the poor are in a majority in these jurisdictions and they oppose to a potentially Pareto improving tax reduction because it would attract the rich and shift the majority.

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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 9915.

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Length: 20 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:exe:wpaper:9915

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Postal: Streatham Court, Rennes Drive, Exeter EX4 4PU
Phone: (01392) 263218
Fax: (01392) 263242
Web page: http://business-school.exeter.ac.uk/about/departments/economics/
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Related research

Keywords: SOCIAL CHOICE ; VOTING ; GOVERNMENT;

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Cited by:
  1. Jonathan Hamilton & Pierre Pestieau, 2005. "Optimal Income Taxation and the Ability Distribution: Implications for Migration Equilibria," International Tax and Public Finance, Springer, vol. 12(1), pages 29-45, January.
  2. Glazer, Amihai & Kanniainen, Vesa & Poutvaara, Panu, 2008. "Income taxes, property values, and migration," Munich Reprints in Economics 20449, University of Munich, Department of Economics.
  3. 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.
  4. Guggenberger, Patrik & Kaul, Ashok & Kolmar, Martin, 2002. "Efficiency properties of labor taxation in a spatial model of restricted labor mobility," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 447-473, July.
  5. 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.
  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. Cremer, Helmuth & Pestieau, Pierre, 2002. "Factor Mobility and Redistribution: A Survey," IDEI Working Papers 154, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003.
  8. Kurt Schmidheiny, 2005. "Income Segregation from Local Income Taxation When Households Differ in Both Preferences and Incomes," Discussion Papers Series, Department of Economics, Tufts University 0509, Department of Economics, Tufts University.
  9. 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).
  10. 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.
  11. 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.
  12. Alan Krause, 2009. "A general equilibrium analysis of the Laffer argument," Social Choice and Welfare, Springer, vol. 33(4), pages 601-615, November.
  13. Alan Krause, 2007. "A Tax Reform Analysis of the Laffer Argument," Discussion Papers 07/10, Department of Economics, University of York.
  14. Lee, Woojin, 2004. "Mobility and tax competition when wages are endogenously determined," Economics Letters, Elsevier, vol. 83(3), pages 347-353, June.

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