Income Distribution and Redistribution within Federations
David E. Wildasin Department of Economics Vanderbilt University Nashville, TN, 37355 USA
In a federation, workers are generally legally entitled to seek employment in any locality or region. On the other hand, not all factors of production are equally mobile and some workers or other factors may not be able to relocate in order to take advantage of higher returns in other jurisdictions. Furthermore, the higher degree of factor mobility within a federation may constrain the ability of individual jurisdictions to undertake redistributive policies. The paper analyzes the efficiency and distributional consequences of the formation of federations and of decentralized redistributive policies within federations.