Does Mobility Undermine Income Redistribution? A Political-Support Approach to Redistribution in a Federation

This paper considers a positive model of income redistribution with mobile individuals in a federal system. The politician of a jurisdiction makes redistributive policy to maximize political support from poor welfare recipients and rich taxpayers. If only the poor move, a politician redistributes more than without mobility in an attempt to gain support from the poor. If the rich also move, an increase in the redistributive tax imposed on the rich drives out the rich, decreasing the rich's political opposition. The exodus of the rich, however, may decrease tax revenues available for income redistribution, decreasing the poor's political support. The mobility thus may increase or decrease income redistribution.