Suchergebnisse

I propose a model of income redistribution in an open-economy environment. The world consists of a finite number of countries whose governments seek to maximize the welfare of their low-skilled populations by taxing skilled workers' labor income. While tax competition limits the extent to which redistribution is possible—as compared to the closed-economy outcome—when skilled people are internationally mobile, I argue that race to the bottom does not necessarily occur, even if the number of countries becomes arbitrarily large. The asymptotic sustainability of the welfare state crucially depends on the statistical properties of the probability distribution of skilled people's location preferences.

THIS PAPER STARTS BY SPECIFYING A MODEL OF ELECTIONS IN WHICH, WHEN DECIDING ON WHICH CANDIDATE TO VOTE FOR, VOTERS ARE PRIMARILY CONCERNED WITH THE REDISTRIBUTIONAL CONSEQUENCES OF THE OUTCOME OF THE ELECTION. IN THE FORMULATION OF THIS MODEL IT IS EXPLICITLY ACKNOWLEDGED THAT, WHILE A VOTER MAY BE PRIMARILY CONCERNED WITH WHAT HIS INCOME WILL BE AFTER THE ELECTION IS OVER, A CANDIDATE USUALLY DOES NOT DIRECTLY COMMUNICATE IN DETAIL JUST WHAT INCOME DISTRIBUTION CAN BE EXPECTED IF HE IS ELECTED. RATHER, A CANDIDATE USUALLY CONCENTRATES ON COMMUNICATING HIS POSITIONS ON THE ISSUES OF THE DAY AND LETS THE VOTERS INFER WHAT INCOME DISTRIBUTION THEY CAN EXPECT IF HE IS ELECTED.