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Regional Cohesion Maintenance, Spillovers, and Imperfect Labor Mobility


  • Naoto Aoyama
  • Emilson C. D. Silva


We follow Wellisch (1994) in examining the efficiency of regional policymaking in a model with interregional spillovers and in which individuals are attached to regions for cultural reasons. In addition, we assume that regions desire to maintain their social cohesion. We postulate that regional cohesion maintenance can be adequately formalized in terms of Rawlsian regional welfare functions. We show that in the absence of material (e.g., initial incomes, worker abilities) differences across individuals and with identical consumption tastes, regional governments behave efficiently, internalizing interregional spillovers, provided they anticipate perfect incentive equivalence promoted by labor mobility.

Suggested Citation

  • Naoto Aoyama & Emilson C. D. Silva, 2014. "Regional Cohesion Maintenance, Spillovers, and Imperfect Labor Mobility," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(1), pages 116-127, March.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201403)70:1_116:rcmsai_2.0.tx_2-f
    DOI: 10.1628/001522108X679174

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    References listed on IDEAS

    1. Richard Cornes, 1993. "Dyke Maintenance and Other Stories: Some Neglected Types of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 259-271.
    2. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
    3. Wellisch, Dietmar, 1994. "Interregional spillovers in the presence of perfect and imperfect household mobility," Journal of Public Economics, Elsevier, vol. 55(2), pages 167-184, October.
    4. Mansoorian, Arman & Myers, Gordon M., 1997. "On the consequences of government objectives for economies with mobile populations," Journal of Public Economics, Elsevier, vol. 63(2), pages 265-281, January.
    5. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-774, September.
    6. Robin Boadway & Katherine Cuff & Maurice Marchand, 2003. "Equalization and the Decentralization of Revenue-Raising in a Federation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 201-228, April.
    7. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
    8. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
    9. Seth Kaplan, 2009. "Identity in Fragile States: Social cohesion and state building," Development, Palgrave Macmillan;Society for International Deveopment, vol. 52(4), pages 466-472, December.
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    More about this item


    social cohesion; interregional spillovers; attachment;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism


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