Variable population size issues in models of decentralized income redistribution

We examine the distributive implications of decentralized redistribution in a federation with mobility. From a regional perspective, redistribution in volves variable populations. As distribution and population issues are norm atively inseparable, regional social preferences should exhibit reasonable properties in both respects. Critical-level (CL) utilitarianism does so. In autarky, CL utilitarian governments implement an egalitarian solution. Wit h free mobility some degree of inequality always proves optimal when critic al levels are fixed. Egalitarianism can be reached as a Nash equilibrium if and only if average incomes are used as variable critical levels. Since th is is unacceptable on efficiency grounds we conclude that under reasonable assumptions egalitarian outcomes do not survive in fiscal games. (C) 2000 E lsevier Science B.V. All rights reserved.