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Interregional transfers: A political-economy CGE approach

  • Nicolaas Groenewold
  • Alfred Hagger
  • John Madden

We model the effects of changes in a federal government’s inter-regional transfers within the context of a CGE model of a federal system in which regional governments act to maximise the welfare of the residents of their region subject to the effects of their decision on regional economic outcomes. Regional governments are modelled as players in a non-cooperative game. Simulations are conducted with six versions of a small two-region model, each calibrated for a particular Australian state and the rest of the nation. We show that a change in the level of transfers has little influence on per-capita private consumption, government consumption and welfare, and that its main effect is to induce migration from the donor region to the recipient region. Copyright Springer-Verlag Berlin/Heidelberg 2003

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Article provided by Springer in its journal Papers in Regional Science.

Volume (Year): 82 (2003)
Issue (Month): 4 (November)
Pages: 535-554

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Handle: RePEc:spr:presci:v:82:y:2003:i:4:p:535-554
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