Ex ante Free Mobility, Ex post Immobility, and Time-Consistent Policy in a Federal System

This paper examines regional population distribution when there is an interregional transfer policy without commitment. We introduce explicitly the following time structure of actions. Individuals make decisions on locational choices freely ex ante, but are immobile ex post. The interregional transfer policies by regional governments and the central govenment are implemented after individuals' migration decisions. We obtain the following results. First, locally stable time-consistent equilibria are single-community equilibria when there is a pure local public good. When we extend the basic model by taking account of capital, congestion, and spillovers in the provision of a public good, it is shown that whether or not central government intervention enhances the efficiency of the population distribution depends upon several economic factors.