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So, rich and poor citizens of the wealthier region will coalesce with the rich
citizens of the poor region on an exchange in which interregional transfers
(T) are used to limit the extent of interpersonal redistribution (t), even if at
the expense of the poorest members of society. That way, they limit the scope
of migration that would undermine the viability of more decentralized inter-
personal redistribution. This will be the optimal strategy until an additional
marginal increase in interregional redistribution (T) equates to the net loss
due to changes in interpersonal redistribution (t) motivated by larger levels of
cross-regional mobility of dependents.
In conclusion, support for a combination of decentralized interpersonal
redistribution and generous interregional transfers is likely to grow stronger
where high levels of dependents' mobility and regional economic specializa-
tion co-exist. The resulting fiscal structure would be dominated by interre-
gional redistribution (H). The underlying logic of prospective self-insurance
is also at work in the international arena: the privileged prefer to pay to
keep the poor away rather than risk allowing undesired dependents into their
economies.
To summarize, mobility works to reduce risk differentials across regions,
thereby creating the conditions for more integrated fiscal structures. Whether
such integration adopts the form of a hybrid (H) or a fully centralized system
(C) depends on the patterns of regional economic specialization. The coex-
istence of high specialization in wealthy areas and large levels of mobility
creates incentives for wealthier regions to accept interregional redistribution
to preserve the nature of their local systems of production and interpersonal
redistribution.
This analysis of mobility completes the study of the determinants of pref-
erences for fiscal structures. While cross-regional variation in inequality and
economic specialization work to facilitate more decentralized systems of redis-
tribution, large levels of mobility create pressure in the opposite direction.
Together, economic geography and mobility determine the map of contend-
ing institutional preferences within the union. The system of representation, in
turn, determines which of these contending preferences ultimately prevails.
FROM PREFERENCES TO CHOICES: REPRESENTATION
AND THE CHOICE OF FISCAL STRUCTURES
One of two mechanisms identified in the analysis of the interplay between
national and regional elites is that of the electoral constraints associated with
economic geography. The second concerns the balance of power between local
and national interests in the political process, as determined by the system of
representation. In combination with the distribution of preferences emerging
from economic geography, this mechanism conditions both the probability
(
) that the regional party elite accepts the centralization attempts of national
party elites under SQ1 and the probability (
α
) that the national elite will accept
decentralization attempts by the regional party elites under SQ2.
β
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