| Abstract: | We examine the distributive implications of decentralized redistribution in a federation with mobility. From a regional perspective, redistribution involves variable populations. As distribution and population issues are normatively inseparable, regional social preferences should exhibit reasonable properties in both respects. Critical-level (CL) utilitarianism does so. In autarky, CL utilitarian governments implement an egalitarian solution. With free mobility some degree of inequality always proves optimal when critical levels are fixed. Egalitarianism can be reached as a Nash equilibrium if and only if average incomes are used as variable critical levels. Since this is unacceptable on efficiency grounds we conclude that under reasonable assumptions egalitarian outcomes do not survive in fiscal games. |
