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Efficiency of Local Policy Programmes under Free Migration

Author

Listed:
  • Hannu Laurila

    (School of Management, University of Tampere)

Abstract

A Neo-Keynesian macroeconomic model is constructed to examine the efficiency of a local tax-transfer programme under free migration. An application of the Adaptive Expectations Hypothesis is used todescribe people’s perceptions of the programme. It is shown that fair programmes with no effects on localwelfare have no effect on migration either thus being efficient in the long term. In the short term, falseperceptions concerning the repayments make the programme unfair. Migration enforces the excess burden ofan unfair programme, but gradual correction of the perceptions eventually mitigates the effects to zero.

Suggested Citation

  • Hannu Laurila, 2007. "Efficiency of Local Policy Programmes under Free Migration," Working Papers 0759, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:0759
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    Download full text from publisher

    File URL: http://urn.fi/urn:isbn:978-951-44-7047-9
    File Function: First version, 2007
    Download Restriction: no
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    More about this item

    Keywords

    AEH; fair/unfair policy plan; tax competition;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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