External Equilibrium in Mobility and Redistribution Economies

M. Socorro Puy

Journal of Public Economic Theory, 2003, vol. 5, issue 2, 363-379

Abstract: We develop a simple model in which individuals, who are differentiated by skill levels, freely choose location among different regions. In each region there is a local labor market that determines the wage and a local redistributive taxation that is exogenously determined. Equilibrium requires that no agent wishes to migrate. We define some sufficient conditions for equilibrium, and we show that the greater the difference in mean skills across regions, the greater the difference in redistributive taxations across regions should be to avoid migration flows. A condition for uniqueness and stability of equilibrium is also provided.

Date: 2003
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