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Discussion Paper Details

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Title: Redistribution Policy: A European Model

Author(s): Alessandra Casella

Publication Date: November 2002

Keyword(s): economic integration, enlargement, European Union, migration and structural funds

Programme Area(s): International Macroeconomics, International Trade and Regional Economics and Public Economics

Abstract: Following the rationale for regional redistribution programmes described in the official documents of the European Union, this Paper studies a very simple multi-country model built around two regions: a core and a periphery. Technological spillovers link firms? productivity in each of the two region, and each country?s territory falls partly in the core and partly in the periphery, but the exact shares vary across countries. We find that, in line with the EU view, the efficient regional allocation requires both national and international transfers. If migration is fully free across all borders, then optimal redistribution policy results from countries? uncoordinated policies, obviating the need for a central agency. But if countries have the option of setting even imperfect border barriers, then efficiency is likely to require coordination on both barriers and international transfers (both of which will be set optimally at positive levels). The need for coordination increases as the Union increases in size.

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Bibliographic Reference

Casella, A. 2002. 'Redistribution Policy: A European Model'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3620