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Group Welfare and the Formation of a Common Labor Market: Some Global Results

Paul Rothstein () and Gary Hoover ()

International Tax and Public Finance, 2006, vol. 13, issue 1, 3-23

Abstract: Consider a collection of isolated or autarkic regions. The original residents or natives of each region are by assumption a group with a welfare function defined over group members' consumption. Now suppose the regions form a common labor market and a federal government, and one type from each group can freely migrate to other regions. Under what circumstances is this change even potentially beneficial to all groups? We derive a necessary and sufficient condition that depends only on the exogenous parameters of our model. Earlier treatments of these issues focus on relationships among endogenous variables. Our condition underlies those relationships. We also show that there is nothing pathological about the conditions under which federalism must make some or all groups worse off. When it is possible to make all groups better off, we show that the change can be supported by Wildasin's (1991) corrected Nash equilibrium in redistributive transfers. Copyright Springer Science + Business Media, Inc. 2006

Keywords: federalism; factor mobility; redistribution; globalization; welfare economics (search for similar items in EconPapers)
Date: 2006
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