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Mobility and Redistributive Politics

Jean Hindriks ()

Discussion Papers from University of Exeter, Department of Economics

Abstract: There is a widespread concern that a greater mobility of individuals can undermine any attempt to redistribute income at the local level. In this paper we derive the equilibrium level of redistribution when both the rich and the poor are mobile (although in different degrees) and when each jurisdiction chooses its redistributive policy by majority voting. This leads to a fundamental interaction whereby the policy choices of jurisdictions determine who they attract, and who they attract determines their policy choices. Our main findings are twofold. First, we show that a greater mobility of the poor can increase the equilibrium amount of redistribution. Second, we find that some jurisdictions can be stuck in equilibrium on the RwrongS side of their Laffer curve. The reason is that the poor are in a majority in these jurisdictions and they oppose to a potentially Pareto improving tax reduction because it would attract the rich and shift the majority.

Keywords: SOCIAL CHOICE; VOTING; GOVERNMENT (search for similar items in EconPapers)
JEL-codes: C72 D71 H71 R51 (search for similar items in EconPapers)
Date: 1999
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