- EQUILIBRIUM IN MOBILITY AND REDISTRIBUTION MODELS

M. Socorro Puy

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We develop a simple model in which individuals migrate freely among regions. In each region there is a majority voting procedure that determines a proportional taxation on earnings which finances a uniform transfer for each of the agents. Equilibrium requires that no one wishes to migrate and that the taxation policy be the result of majority voting in each region. In this setting Caplin and Nalebu (1997) show that there is no equilibrium, since all the agents want to live in a region where their income is below the mean income. Furthermore, we assume that in each region there is a competitive labor market that endogenously determines the wages. Then, if the agents when migrating take into account the taxation and the wages of each region, we find that equilibrium exists. This result is obtained for two diferent kinds of agents rationally: myopic and sophisticated agents.

Keywords: Tiebout Model; Redistribution; Policy-based equilibrium (search for similar items in EconPapers)
Pages: 30 pages
Date: 1999-05
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:1999-09

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