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Income Redistribution with Well-Informed Local Governments

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  • Horst Raff
  • John Wilson

Abstract

This paper examines the problem of redistributing incomeacross jurisdictions and to mobile workers within jurisdictionswhen local governments have better information than the centralgovernment about local production conditions. Under the centralgovernment‘s optimal policy, the subsidies or taxes that localgovernments provide to mobile workers normally depend on whetherthese governments are net recipients or net donors of interjurisdictionalincome transfers. Moreover, the public-input decisions of somelocal governments are distorted. The analysis demonstrates thatit may not be desirable to harmonize social policies across jurisdictions,even when the beneficiaries are quite mobile. Copyright Kluwer Academic Publishers 1997

Suggested Citation

  • Horst Raff & John Wilson, 1997. "Income Redistribution with Well-Informed Local Governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(4), pages 407-427, November.
    • Handle: RePEc:kap:itaxpf:v:4:y:1997:i:4:p:407-427
    DOI: 10.1023/A:1008604813486
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    References listed on IDEAS

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    6. Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001. "Optimal Regional Redistribution under Asymmetric Information," American Economic Review, American Economic Association, vol. 91(3), pages 709-723, June.
    7. Helmuth Cremer & Pierre Pestieau, 1997. "Income Redistribution in an Economic Union: The Trade Off Between Inter- and Intra-National Redistribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 325-335, July.
    8. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
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