Interregional Redistribution and Mobility in Federations: A Positive Approach

Anke Kessler and Nico Hansen

No 4576, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The Paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice. We find that paradoxical consequences of interjurisdictional transfers can arise if people are mobile: while self-sufficient regions are necessarily identical with respect to policies and average incomes in our model, interregional redistribution always leads to the divergence of regional policies and per capita incomes. Thus, interregional redistribution prevents interregional equality. As we show, however, it at the same time allows for more interpersonal equality among the inhabitants of each region. For this reason, the voting population may in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence.

Keywords: Interregional transfers; Fiscal federalism; Migration; Redistribution (search for similar items in EconPapers)
JEL-codes: H71 H73 (search for similar items in EconPapers)
Date: 2004-08
New Economics Papers: this item is included in nep-geo, nep-pbe and nep-pol
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Citations: View citations in EconPapers (9)

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Journal Article: Interregional Redistribution and Mobility in Federations: A Positive Approach (2011)
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