SFB 303 Discussion Paper No. A - 543
Author: Hansen, N. and Kessler, A.S.
Title: A Positive Theory of Interregional Redistribution and Constitutional Choice
Abstract: The paper studies the effects and the determinants of interregional
redistribution in a federation of jurisdictions among which households are mobile.
Each jurisdiction controls a local redistributive policy that is democratically chosen
by its residents. Paradoxical consequences of interjurisdictional transfers
arise. If regions are self sufficient, they necessarily
converge with respect to policies and average
incomes. Horizontal transfers between jurisdictions, in contrast, lead to the divergence
of regional policies and per capita
incomes. Because interregional transfer schemes prevent interregional equality,
however, they also allow 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,Redistribution, Migration
JEL-Classification-Number: H71, H73
Creation-Date: September 1999
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