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Strategic Inter-Regional Transfers

Jean Hindriks () and Gareth Myles ()

Journal of Public Economic Theory, 2003, vol. 5, issue 2, 229-248

Abstract: We derive the equilibrium level of redistribution from one mobile factor (say, the rich or capital) to another possibly mobile factor (say, the poor or labour) when regions choose both their inter-regional transfers and redistributive policies non-cooperatively. It is shown that inter-regional transfers are always desirable (to mitigate the fiscal competition), but cannot be sustained (as a Nash equilibrium) when chosen simultaneoulsy with the redistributive policy. On the other hand, if regions can pre-commit to inter-regional transfers before setting their redistributive policy, their strategic effect makes efficient inter-regional transfers sustainable. However, there are also equilibria with inefficiently small inter-regional transfers or no transfers at all. The effects of regional asymmetries and additional regions on these results are also analyzed. Copyright 2003 Blackwell Publishing Inc..

Date: 2003
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Working Paper: Strategic inter-regional transfers (2003) Downloads
Working Paper: Strategic inter-regional transfers (2001) Downloads
Working Paper: Strategic Inter-Regional Transfers (2000) Downloads
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Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

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