Interregional Redistribution and Mobility in Federations: A Positive Approach

35 Pages Posted: 8 Oct 2004

See all articles by Nico A. Hansen

Nico A. Hansen

Apax Partners and Co.

Anke S. Kessler

Simon Fraser University (SFU) - Department of Economics; University of Bonn - Economic Science Area; Centre for Economic Policy Research (CEPR)

Date Written: August 2004

Abstract

The Paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice. We find that paradoxical consequences of interjurisdictional transfers can arise if people are mobile: while self-sufficient regions are necessarily identical with respect to policies and average incomes in our model, interregional redistribution always leads to the divergence of regional policies and per capita incomes. Thus, interregional redistribution prevents interregional equality. As we show, however, it at the same time allows for more interpersonal equality among the inhabitants of each region. For this reason, the voting population may in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence.

Keywords: Interregional transfers, fiscal federalism, migration, redistribution

JEL Classification: H71, H73

Suggested Citation

Hansen, Nico A. and Kessler, Anke S., Interregional Redistribution and Mobility in Federations: A Positive Approach (August 2004). CEPR Discussion Paper No. 4576. Available at SSRN: https://ssrn.com/abstract=602363

Nico A. Hansen

Apax Partners and Co.

Possartstrasse 11
D-81679 Muenchen
Germany

Anke S. Kessler (Contact Author)

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
604-291-3443 (Phone)
604-291-5944 (Fax)

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
+49 228 739 246 (Phone)
+49 228 739 221 (Fax)

HOME PAGE: http://www.wipol.uni-bonn.de/~kessler/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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