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Interregional Redistribution and Mobility in Federations: A Positive Approach

Author

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  • Anke S. Kessler
  • Nico A. Hansen
  • Christian Lessmann

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 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. At the same time, however, transfers may allow for more interpersonal equality among the inhabitants of each region. The voting population may therefore in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence. Empirical evidence from panel data from OECD countries and Canadian provinces is consistent with the theory. Copyright 2011, Oxford University Press.

Suggested Citation

  • Anke S. Kessler & Nico A. Hansen & Christian Lessmann, 2011. "Interregional Redistribution and Mobility in Federations: A Positive Approach," Review of Economic Studies, Oxford University Press, vol. 78(4), pages 1345-1378.
  • Handle: RePEc:oup:restud:v:78:y:2011:i:4:p:1345-1378
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    File URL: http://hdl.handle.net/10.1093/restud/rdr003
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    Cited by:

    1. Lessmann, Christian, 2013. "Foreign direct investment and regional inequality: A panel data analysis," China Economic Review, Elsevier, vol. 24(C), pages 129-149.
    2. Joan Costa-i-Font & Gilberto Turati, 2016. "Regional Health Care Decentralization in Unitary States: Equal Spending, Equal Satisfaction?," CESifo Working Paper Series 5973, CESifo Group Munich.
    3. Matthias Wrede, 2006. "Uniformity Requirement and Political Accountability," Journal of Economics, Springer, vol. 89(2), pages 95-113, November.
    4. Christian Lessmann, 2016. "Regional Inequality and Internal Conflict," German Economic Review, Verein für Socialpolitik, vol. 17(2), pages 157-191, May.
    5. Christian Lessmann, 2009. "Fiscal Decentralization and Regional Disparity: Evidence from Cross-Section and Panel Data," Environment and Planning A, , vol. 41(10), pages 2455-2473, October.
    6. Christian Lessmann, 2012. "Regional inequality and decentralization: an empirical analysis," Environment and Planning A, Pion Ltd, London, vol. 44(6), pages 1363-1388, June.
    7. Lessmann, Christian & Seidel, André, 2017. "Regional inequality, convergence, and its determinants – A view from outer space," European Economic Review, Elsevier, vol. 92(C), pages 110-132.
    8. Lessmann, Christian, 2014. "Spatial inequality and development — Is there an inverted-U relationship?," Journal of Development Economics, Elsevier, vol. 106(C), pages 35-51.
    9. Kira Boerner & Silke Uebelmesser, 2007. "Migration and the welfare state: The economic power of the non-voter?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 93-111, February.
    10. Thushyanthan Baskaran & Lars P. Feld & Sarah Necker, 2017. "Depressing dependence? Transfers and economic growth in the German states, 1975–2005," Regional Studies, Taylor & Francis Journals, vol. 51(12), pages 1815-1825, December.
    11. Georg Hirte & Christian Leßmann, 2014. "Trade, Integration, and Interregional Inequality," CESifo Working Paper Series 4799, CESifo Group Munich.
    12. 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.
    13. Georg Hirte & Christian Lessmann, 2014. "Trade and Interregional Inequality," ERSA conference papers ersa14p304, European Regional Science Association.

    More about this item

    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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