Agent-based Computational Model of Democratic Choice of Redistribution under Almost Perfect Human Mobility

This paper shows by means of an agent-based simulation that people's ability to relocate from one region to another creates no tax competition among the regions if the taxes and transfers are set democratically. We can observe three types of behavior: 1) if the cost of relocation is high, no one relocates and the original level of redistributions is sustained; 2) if the cost is low, the system has no steady state-the more productive people run away from redistribution and the less productive ones pursue them forever; 3) if the cost is medium, usually only the more productive people relocate-the tax rates usually fall and converge (but not always). If they do, it is because the populations are more homogenous after the relocation, not because of tax competitions-there is none.