Skill Distributions and the Compatibility between Mobility and Redistribution

Abstract

We study to what extend in a Tiebout economy, the exogenous distribution of skill across agents affects the compatibility between mobility an redistribution. We propose a two-region economy where: i) each region redistributive policy is elected by majority rule (where both cases: myopic and sophisticated voters are considered), and ii) each region wage is endogenously determined by a separated labor market. We find that the compatibility between mobility and redistribution can be guaranteed when either there is a low-skilled region where the median skilled agent is below the mean skill of the region, or/and when there is a high-skilled region where the median skilled agent is above the mean skill of the region.Tiebout Economy; Redistribution; Sophisticated Voting; Majority rule.