Ratio Working Papers,
The Ratio Institute

Abstract: The Swedish system for inter-regional redistribution is examined from a political economy perspective and a growth perspective. A number of recent Swedish studies of this system are examined. Political economy concerns are found to be adequately represented in academic studies of this system, while lacking, at least explicitly, in all the major relevant government reports. Growth implications of extensive inter-regional redistribution are found to be relatively neglected in both academic studies and government reports. In particular, the short-circuiting of labour mobility (and hence the impairment of long-term structural adjustment) is examined at both micro- and macroeconomic levels. It is concluded that extensive inter-regional redistribution is likely to have considerable effects on labour mobility. The author argues that this almost entirely overlooked effect is an important consideration in evaluating the costs and benefits of inter-regional redistribution, and calls for further enquiry into the matter.

Keywords: Inter-regional redistribution; fiscal federalism; political economy; growth; labour force mobility

JEL-codes: D72; D78; E60; H11; H31; H71; H77; O18; R23; R58

29 pages, January 11, 2006

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