Interregional Redistribution and Regional Disparities: How Equalization Does (Not) Work
Do inter-governmental transfers such as equalization grants reduce interregional disparities? This paper studies both theoretically and empirically the impact of interregional redistribution on interregional inequality. We set up a model with residential choice and equalization grants between regions, and show that interregional transfer payments prevent convergence promoting migration. We test our model in using cross-country data and panel data for 22 highly developed OECD countries. The evidence suggests a positive relationship between interregional transfers and regional disparities both across countries and over time from 1982 to 2000. In the cross-section data, we find that countries with higher levels of interregional redistribution in the past show a subsequent increase in interregional disparity, while countries with lower levels of grants and transfers show less divergence or even convergence. The panel reveals a similar picture: countries who have increased their sub-governmental transfers and grants have experienced more divergence (less convergence) over time than countries who have lowered their transfers.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Dec 2010|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
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.:
- Desmet, Klaus, 1999.
"A simple dynamic model of uneven development and overtaking,"
UC3M Working papers. Economics
6130, Universidad Carlos III de Madrid. Departamento de Economía.
- Klaus Desmet, 2002. "A Simple Dynamic Model of Uneven Development and Overtaking," Economic Journal, Royal Economic Society, vol. 112(482), pages 894-918, October.
- Sinn, Hans-Werner & Ochel, Wolfgang, 2003.
"Social Union, Convergence and Migration,"
Munich Reprints in Economics
948, University of Munich, Department of Economics.
- Andrés Rodríguez-Pose & Nicholas Gill, 2004. "Is there a global link between regional disparities and devolution?," Environment and Planning A, Pion Ltd, London, vol. 36(12), pages 2097-2117, December.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Sala-i-Martin, Xavier X., 1996.
"Regional cohesion: Evidence and theories of regional growth and convergence,"
European Economic Review,
Elsevier, vol. 40(6), pages 1325-1352, June.
- Sala-i-Martin, Xavier, 1994. "Regional Cohesion: Evidence and Theories of Regional Growth and Convergence," CEPR Discussion Papers 1075, C.E.P.R. Discussion Papers.
- Xavier Sala-i-Martin, 1994. "Regional cohesion: Evidence and theories of regional growth and convergence," Economics Working Papers 104, Department of Economics and Business, Universitat Pompeu Fabra.
- Shaw, R Paul, 1986. "Fiscal versus Traditional Market Variables in Canadian Migration," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 648-666, June.
- Christian Lessmann, 2009.
"Fiscal decentralization and regional disparity: evidence from cross-section and panel data,"
Environment and Planning A,
Pion Ltd, London, vol. 41(10), pages 2455-2473, October.
- Christian Lessmann, 2009. "Fiscal Decentralization and Regional Disparity: Evidence from Cross-Section and Panel Data," Environment and Planning A, SAGE Publishing, vol. 41(10), pages 2455-2473, October.
- Lessmann, Christian, 2009. "Fiscal decentralization and regional disparity: Evidence from cross-section and panel data," Dresden Discussion Paper Series in Economics 08/09, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
- Roberto Ezcurra & Pedro Pascual, 2008. "Fiscal decentralization and regional disparities: evidence from several European Union countries," Environment and Planning A, Pion Ltd, London, vol. 40(5), pages 1185-1201, May.
- Michael Smart, 2007.
"Raising taxes through equalization,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 40(4), pages 1188-1212, November.
- Michele Boldrin & Fabio Canova, 2001. "Inequality and convergence in Europe's regions: reconsidering European regional policies," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 205-253, 04.
- Jeffrey B. Nugent & Makoto Yano, 1999.
"Aid, Nontraded Goods, and the Transfer Paradox in Small Countries,"
American Economic Review,
American Economic Association, vol. 89(3), pages 431-449, June.
- Yano, M. & Nugent, J.B. & Lay, R.N., 1995. "Aid, Non-Traded Goods and the Transfer Paradox in Small Countries," Papers 9515, Southern California - Department of Economics.
- Yingyi Qian & Barry R. Weingast, 1997.
"Federalism as a Commitment to Preserving Market Incentives,"
97042, Stanford University, Department of Economics.
- Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
- Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
- Kathleen M. Day, 1992. "Interprovincial Migration and Local Public Goods," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 123-144, February.
- David E. Wildasin, 1994.
"Income Redistribution and Migration,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 27(3), pages 637-656, August.
- 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.
- 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.
- Hansen, Nico & Kessler, Anke, 2004. "Interregional Redistribution and Mobility in Federations: A Positive Approach," CEPR Discussion Papers 4576, C.E.P.R. Discussion Papers.
- Aadne Cappelen & Fulvio Castellacci & Jan Fagerberg & Bart Verspagen, 2003. "The Impact of EU Regional Support on Growth and Convergence in the European Union," Journal of Common Market Studies, Wiley Blackwell, vol. 41, pages 621-644, 09.
- Serge Coulombe & Kathleen M. Day, 1999. "Economic Growth and Regional Income Disparities in Canada and the Northern United States," Canadian Public Policy, University of Toronto Press, vol. 25(2), pages 155-178, June.
- Christian Leßmann, 2006. "Fiscal Decentralization and Regional Disparity: A Panel Data Approach for OECD Countries," Ifo Working Paper Series Ifo Working Papers No. 25, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
- Phillip L Swagel & Steven V Dunaway & Martin D Kaufman, 2003. "Regional Convergence and the Role of Federal Transfers in Canada," IMF Working Papers 03/97, International Monetary Fund.
- Brezis, Elise S & Krugman, Paul R & Tsiddon, Daniel, 1993. "Leapfrogging in International Competition: A Theory of Cycles in National Technological Leadership," American Economic Review, American Economic Association, vol. 83(5), pages 1211-1219, December.
- Raquel Fernandez & Richard Rogerson, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 135-164.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8133. 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: ()
If references are entirely missing, you can add them using this form.