Redistribution Policy: A European Model

Columbia University, Economics Discussion Paper No. 0203-06

36 Pages Posted: 27 Jan 2003

See all articles by Alessandra Casella

Alessandra Casella

Columbia University - Graduate School of Arts and Sciences, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2002

Abstract

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 region, 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.

Keywords: regional policy, redistribution policy, economic geography, enlargement, European Union

JEL Classification: F2, H7, R1

Suggested Citation

Casella, Alessandra, Redistribution Policy: A European Model (September 2002). Columbia University, Economics Discussion Paper No. 0203-06, Available at SSRN: https://ssrn.com/abstract=346200 or http://dx.doi.org/10.2139/ssrn.346200

Alessandra Casella (Contact Author)

Columbia University - Graduate School of Arts and Sciences, Department of Economics ( email )

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