Interregional transfers: A political-economy CGE approach

Nicolaas Groenewold, Alfred Hagger and John Madden

Economics of Governance, 2003, vol. 82, issue 4, 535-554

Abstract: We model the effects of changes in a federal government’s inter-regional transfers within the context of a CGE model of a federal system in which regional governments act to maximise the welfare of the residents of their region subject to the effects of their decision on regional economic outcomes. Regional governments are modelled as players in a non-cooperative game. Simulations are conducted with six versions of a small two-region model, each calibrated for a particular Australian state and the rest of the nation. We show that a change in the level of transfers has little influence on per-capita private consumption, government consumption and welfare, and that its main effect is to induce migration from the donor region to the recipient region. Copyright Springer-Verlag Berlin/Heidelberg 2003

Keywords: Interregional transfers; political economy; computable general equilibrium analysis; fiscal federalism; interregional migration (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s10110-003-0191-x

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