Intergovernmental transfers as magnets for low-income people

Masataka Harada and Tetsuya Matsubayashi

Applied Economics Letters, 2024, vol. 31, issue 6, 513-517

Abstract: We demonstrate that intergovernmental transfers affect migration decisions. If local governments with large distributive allocations offer greater government employment, public works projects, and assistance to (small) businesses, they attract low-skilled or unemployed residents to move or stay in. We find that more allocations increase not only the share of low-income residents but also the economic disparity in the city. We exploit the major electoral reform in Japan as an instrumental variable.

Date: 2024
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DOI: 10.1080/13504851.2022.2139801

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