Abstract
Decentralization of income redistribution may lead to policy competition between jurisdictions and therefore underprovision of redistribution. The ability to carry out redistribution programs is therefore an argument in favor of allocating this responsibility to some higher level authority. On the other hand, empirical results show that the taste for redistribution is lower in multi-ethnic jurisdictions than in more homogenous ones. Centralized redistribution may encompass a larger number of ethnic minorities, and thereby negatively affect redistribution programs. The present paper models the trade-off between these two forces and argues that this trade-off will depend on the nature of altruistic preferences.
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We would like to thank two anonymous referees for constructive comments and suggestions. The usual disclaimer applies. We would also like to thank Ruhrgas AG for financial support, and Wissenschaftzentrum Berlin (WZB) for hosting us during the summer of 2003, when this paper was written.
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Bjorvatn, K., Cappelen, A.W. Redistribution and the Nature of Altruism: Should Welfare Programs be Centralized or Decentralized?. Economics of Governance 7, 133–142 (2006). https://doi.org/10.1007/s10101-005-0007-3
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DOI: https://doi.org/10.1007/s10101-005-0007-3