Author: Professor James Buchanan
The first paper in the series was contributed by Nobel Laureate Professor James Buchanan. Professor Buchanan made a seminal contribution to our understanding of federalism almost 50 years ago with his work on fiscally-induced migration. In that theoretical analysis, he showed how differences in fiscal capacity among member states in a federation could lead to economically inefficient migration. Equalization grants could be used to reduced fiscal disparities between regions and thus prevent this inefficient “fiscally-induced” migration.
In this paper, Professor Buchanan returns to his original contribution to our knowledge of federalism and adds the perspective for which he is most famous: public choice. He warns us that from the public choice perspective – where governments have separate interests that may be distinct from voters’ — the desirability of equalizing transfers is uncertain because recipient governments may use grants in ways that further their political goals rather than improving the efficiency of the national economy.