Political Geography and Income Inequalities

Abstract

This paper displays an analysis of geopolitical organizations within the framework proposed by Alesina and Spolaore (1997), where heterogeneity concerns the geographical space. This model adds heterogeneity in terms of income. Main results of the paper: (i) in the normative equilibrium (social planner solution) there is an inverse relationship between income inequality and public good provision within each jurisdiction; (ii) in the positive equilibrium (equilibrium geography) we find that in some cases there are no equilibria depending upon income inequality.Jurisdiction Size, Public Spending, Income Distribution, Tax Distortion