Keywords: Income Redistribution, Migration,
Fiscal Federalism
JEL-Classification: H71,H73
We
investigate a positive model of income redistribution in a federation of
economically integrated but politically independent jurisdictions among which
agents are mobile. The redistributive tax system of each jurisdiction, which
consists of a lump sum transfer and a tax on endogenously determined labor
income, is determined by majority vote of its residents. We characterize
equilibria under various assumptions on the time structure of voting and
residential choice and the degree of voter sophistication. It is shown that if
voters move and vote simultaneously and foresee policy induced migration, no
redistribution will take place. If, however, voters decide on their location
before they take part in the political choice process, this conclusion is
reversed and there may be considerable redistribution in equilibrium. In this
case, jurisdictions converge with respect to policies and per capita incomes,
even though inter-jurisdictional transfers are ruled out.
Copyright © 1996 Anke Kessler