Strategic inter-regional transfers
In this paper we derive the equilibrium level of redistribution from one mobile factor (say, the rich or capital) to another posibly mobile factor (say, the poor or labour) when regions choose both their inter-regional transfers and redistributive policies non-cooperatively. We find that inter-regional transfers are always desirable (to mitigate the fiscal competition), but cannot be sustained (as a Nash equilibrium) when chosen simultaneously with the redistributive policy. On the other hand if regions can precommit t0o inter-regional transfers before setting their redistributive policy, the strategic effect of interregional transfers makes them sustainable. However there are also equilibria with partial or no inter-regional transfers at all. The effects of regional asymmetries are analyzed. Interestingly enough, evidence suggests that predictions of our model accord very closely with the pattern of transfers in the EU across member states.
|Date of creation:||00 Jan 2001|
|Date of revision:|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
- Konishi, Hideo & Le Breton, Michel & Weber, Shlomo, 1998. "Equilibrium in a Finite Local Public Goods Economy," Journal of Economic Theory, Elsevier, vol. 79(2), pages 224-244, April.
- Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August.
- 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.
- Wildasin, D.E., 1992.
"Income Restribution and Migration,"
92-003, Indiana - Center for Econometric Model Research.
- Kirchgassner, Gebhard & Pommerehne, Werner W., 1996. "Tax harmonization and tax competition in the European Union: Lessons from Switzerland," Journal of Public Economics, Elsevier, vol. 60(3), pages 351-371, June.
- Myers, Gordon M., 1990.
"Optimality, free mobility, and the regional authority in a federation,"
Journal of Public Economics,
Elsevier, vol. 43(1), pages 107-121, October.
- Myers & G.M., 1989. "Optimality, Free Mobility And The Regional Authority In Federation," Working Papers 10, John Deutsch Institute for the Study of Economic Policy.
- Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
- Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 18(2), pages 328-348, August.
- Piketty, Thomas, 1996. "A federal voting mechanism to solve the fiscal-externality problem," European Economic Review, Elsevier, vol. 40(1), pages 3-17, January.
- Hansen, N. & Kessler, A.S., 1999. "A Positive Theory of Interregional Redistribution and Constitutional Choice," Discussion Paper Serie A 543, University of Bonn, Germany.
- CREMER, Helmuth & FOURGEAUD, Virginie & LEITE MONTEIRO, Manuel & MARCHAND, Maurice, 1995.
"Mobility and Redistribution : A Survey,"
CORE Discussion Papers
1995066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Caplin, Andrew & Nalebuff, Barry, 1997. "Competition among Institutions," Journal of Economic Theory, Elsevier, vol. 72(2), pages 306-342, February.
- 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.
- Inman, Robert P. & Rubinfeld, Daniel L., 1996. "Designing tax policy in federalist economies: An overview," Journal of Public Economics, Elsevier, vol. 60(3), pages 307-334, June.
- Hindriks, J., 1998. "Tax versus Transfer Competition," Discussion Papers 9808, Exeter University, Department of Economics.
- Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
- Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November.
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2001004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If references are entirely missing, you can add them using this form.