ON THE CONSEQUENCES OF GOVERNMENT OBJECTIVES FOR ECONOMIES WITH MOBILE POPULATIONS

We compare the efficiency and social welfare properties of equilibria resulting from different governmental objectives in a federal system w ith a mobile population. The objectives considered are total utility, average utility, representative resident's utility, and profit maximiz ation. The representative resident approach is unique in that it depen ds only on utility. It yields the best efficient allocation from the p erspective of a government's residents. Average utility yields an effi cient allocation that non-residents prefer. Both the profit-maximizing and total utility approaches may lead to inefficient allocations. We also show that the representative resident approach is socially prefer red to a total utility approach.