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.

Read the full paper.