- Equilibrium In Mobility And Redistribution Models

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- Equilibrium In Mobility And Redistribution Models

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M. Socorro Puy (Universidad de Málaga)

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M. Socorro Puy

Abstract

We develop a simple model in which individuals migrate freely among regions. In each region there is a majority voting procedure that determines a proportional taxation on earnings which finances a uniform transfer for each of the agents. Equilibrium requires that no one wishes to migrate and that the taxation policy be the result of majority voting in each region. In this setting Caplin and Nalebu (1997) show that there is no equilibrium, since all the agents want to live in a region where their income is below the mean income. Furthermore, we assume that in each region there is a competitive labor market that endogenously determines the wages. Then, if the agents when migrating take into account the taxation and the wages of each region, we find that equilibrium exists. This result is obtained for two diferent kinds of agents rationally: myopic and sophisticated agents.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1999-09.

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Length: 30 pages
Date of creation: May 1999
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1999-09

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Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September. [Downloadable!] (restricted)
Waldman, Michael, 1984. "Worker Allocation, Hierarchies and the Wage Distribution," Review of Economic Studies, Blackwell Publishing, vol. 51(1), pages 95-109, January. [Downloadable!] (restricted)
Rose-Ackerman, Susan, 1979. "Market models of local government: Exit, voting, and the land market," Journal of Urban Economics, Elsevier, vol. 6(3), pages 319-337, July. [Downloadable!] (restricted)

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