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Redistribution Policy: A European Model

  • Alessandra Casella

Following the rationale for regional redistribution programs described in the official documents of the European Union, this paper studies a very simple multi-country model built around two regions: a core and a periphery. Technological spill-overs link firms' productivity in each of the two regions, and each country's territory falls partly in the core and partly in the periphery, but the exact shares vary across countries. We find that, in line with the EU view, the efficient regional allocation requires both national and international transfers. If migration is fully free across all borders, then optimal redistribution policy results from countries' uncoordinated policies, obviating the need for a central agency. But if countries have the option of setting even imperfect border barriers, then efficiency is likely to require coordination on both barriers and international transfers (both of which will be set optimally at positive levels). The need for coordination increases as the Union increases in size.

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File URL: http://www.nber.org/papers/w9258.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9258.

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Date of creation: Oct 2002
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Publication status: published as Casella, Alessandra. "Redistribution Policy: A European Model," Journal of Public Economics, 2005, v89(7,Jul), 1305-1331.
Handle: RePEc:nbr:nberwo:9258
Note: ITI
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