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American Economic Review: Vol. 91 No. 3 (June 2001)

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Is a Uniform Social Policy Better? Fiscal Federalism and Factor Mobility

Article Citation

Perotti, Roberto. 2001. "Is a Uniform Social Policy Better? Fiscal Federalism and Factor Mobility." American Economic Review, 91(3): 596-610.

DOI: 10.1257/aer.91.3.596

Abstract

This paper develops a two-country model to study two questions. How do the degrees of centralization of redistribution and of factor mobility affect the productive efficiency of the economies? What degrees of centralization of redistribution and of factor mobility are likely to be chosen by majority rule? The model shows that a system of centralized redistribution can lead to less efficient outcomes if labor or capital are not mobile; and an inefficient outcome, with incomplete or no factor mobility, receives a majority of votes in both countries, whenever the structure of labor markets is very different in the two countries.

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Authors

Perotti, Roberto (Columbia U and CEPR)

JEL Classifications

H77: Intergovernmental Relations; Federalism; Secession
H50: National Government Expenditures and Related Policies: General
F22: International Migration


American Economic Review


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