Geoscience Reference
In-Depth Information
w
i
t
∗
t
∗
0
0
T > 0
T = 0
Individual
Income
t
∗
t
∗
w
1
1
T > 0
T = 0
0
w
A (
w
A
<
w
)
B(
w
B
>
w
)
Regional Income
FIGURE 2.2. The Geography of Income and Institutional Preferences
income. A is poorer than B, that is, it has a lower aggregate income per capita
(
.
3
As a result income varies along two dimensions: individuals
and regions. Individuals, at any given time, may be employed or unemployed.
The former have a final income defined by their posttax work earnings. The
latter enjoy an income equal to the benefits received while being unemployed.
This approach implies that redistributive concerns exclusively drive individuals.
In addition, citizens are affected by an interregional transfer that, when in
place, is a function of the regional average income vis-`a-vis the union. As a
result, citizens face a decision about two policy instruments, namely, the level
of interpersonal redistribution (t), and the level of interregional transfers of
resources among members of the union, that is to say the level of interre-
gional redistribution (T). On the basis of these premises, one can map out
how the geography of inequality conditions the institutional preferences of dif-
ferent groups defined by their income level and regional location.
Figure 2.2
summarizes the geographical distribution of preferences for redistribution that
follows from the analysis of individual preferences over interpersonal (t) and
interregional (T) redistribution.
4
Figure 2.2
captures the key aspect of the geography of income in political
unions: the coexistence of a redistributive conflict among individuals within
regions and a redistributive conflict between regions within income groups. As
w
A
<
<
w
B
)
w
3
No interregional externalities apply in the analysis in this section. Later in the chapter, I relax
this assumption.
4
The following discussion relies on an analysis of individual preferences that is presented formally
in Appendix A.
