Migrations, public goods and taxes

This paper examines how and why people migrate between two regions with asymmetric size. The agglomeration force comes from the scale economies in the provision of local public goods, whereas the dispersion force comes from congestion in consumption of public goods. Public goods considered resemble club goods (or public goods with congestion) and people are heterogeneous in their migration costs. We find that the large countries can be destination of migrants for sufficiently high provision of public goods, even when the large country taxes too much. The high provision of public good offsets the congestion effect. While, the small country can be the destination of migrants for two reasons. Firstly, when public good supply is intermediate, people move to avoid congestion in the large country and to benefit from low taxation in the small one. Finally, when the provision of public goods is low, people move towards the small countries just to avoid congestion.