Abstract
According to conventional wisdom, Musgrave's “RedistributionBranch” should be assigned to the central level of governmentin a federation. Otherwise, fiscal externalities created by themobility of the poor would render decentralized redistributioninefficient, if not impossible. The paper objects to this viewand argues that decentralized intraregional redistribution canyield efficient outcomes if it is combined with cleverly designedinterregional transfer mechanisms. Within a general frameworkwe give necessary and sufficient conditions for interregionaltransfer schemes to implement efficient allocations as Nash equilibriaof a decentralized redistribution game.
Similar content being viewed by others
References
Bhagwati, J. N., R. Brecher, and T. Hatta. (1993). "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World." American Economic Review83, 606–618.
Blackorby, C., D. Donaldson, and M. Auersperg. (1981). "A New Procedure for the Measurement of Inequality Within and Among Population Subgroups." Canadian Journal of Economics14, 665–685.
Boadway, R. W., and F. Flatters. (1982). "Efficiency and Equalization Payments in a Federal System of Government." Canadian Journal of Economics15, 613–633.
Bossert, W. (1989). On Some Variable Population Size Issues in Welfare Economics. Frankfurt.
Brown, C. C., and W. E. Oates. (1987). "Assistance to the Poor in a Federal System." Journal of Public Economics 32, 307–330.
Buchanan, J.M.(1974). "Who Should Distribute What in a Federal System?" In H.M. Hochman and G. E. Peterson (eds.), Redistribution through Public Choice. New York, London, pp. 22–42.
Buhl, H. U., and A. Pfingsten. (1990). "On the Distribution on Public Funds." European Journal of Political Economy6, 363–376.
Burbidge, J. B., and G. M. Myers. (1994). "Redistribution Within and Across the Regions of a Federation." Canadian Journal of Economics27, 620–636.
Bureau, D., and P. Champsaur. (1992). "Fiscal Federalism and European Economic Unification." American Economic Review, Papers & Proceedings82, 88–92.
Cremer, H., V. Fourgeaud, M. Leite Monteiro, M. Marchand, and P. Pestieau. (1995). Mobility and Redistribution: A Survey. Discussion Paper No. 9469, CORE, Louvain-la-Neuve.
Hurwicz, L. (1994). "Economic Design, Adjustment Processes, Mechanisms, and Institutions." Economic Design 1, 1–14.
Ladd, H. F., and F. C. Doolittle. (1982). "Which Level of Government Should Assist the Poor?" National Tax Journal35, 323–336.
Myers, G. M. (1990). "Optimality, Free Mobility, and the Regional Authority in a Federation." Journal of Public Economics43, 107–121.
Oakland, W. H. (1983). "Income Redistribution in a Federal System." In G. R. Zodrow (ed.), Local Provision of Public Services: The Tiebout Model after Twenty-Five Years, New York, pp. 131–143.
Sinn, H. W. (1990). "Tax Harmonization and Tax Competition in Europe." European Economic Review34, 489–504.
Wildasin, D. E. (1991). "Income Redistribution in a Common Labour Market." American Economic Review81, 757–774.
Wildasin, D. E. (1994). "Income Redistribution and Migration." Canadian Journal of Economics27, 637–656.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Pfingsten, A., Wagener, A. Centralized vs. Decentralized Redistribution: A Case for Interregional Transfer Mechanisms. International Tax and Public Finance 4, 429–451 (1997). https://doi.org/10.1023/A:1008656830324
Issue Date:
DOI: https://doi.org/10.1023/A:1008656830324