Regional Cohesion Maintenance, Spillovers, and Imperfect Labor Mobility

Naoto Aoyama and Emilson Silva

FinanzArchiv: Public Finance Analysis, 2014, vol. 70, issue 1, 116-127

Abstract: We follow Wellisch (1994) in examining the efficiency of regional policymaking in a model with interregional spillovers and in which individuals are attached to regions for cultural reasons. In addition, we assume that regions desire to maintain their social cohesion. We postulate that regional cohesion maintenance can be adequately formalized in terms of Rawlsian regional welfare functions. We show that in the absence of material (e.g., initial incomes, worker abilities) differences across individuals and with identical consumption tastes, regional governments behave efficiently, internalizing interregional spillovers, provided they anticipate perfect incentive equivalence promoted by labor mobility.

Keywords: social cohesion; interregional spillovers; attachment (search for similar items in EconPapers)
JEL-codes: D62 D78 H41 H77 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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DOI: 10.1628/001522108X679174

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