Common labor market, attachment and spillovers in a large metropolis

Abstract In this paper, we extend the home-attachment model to a setting with multiple (more than two) jurisdictions and consider non-cooperative policy making for provision of different types of metropolitan public goods in the presence of a common labor market. Migration and working place choices are independent. We show that the optimal redistributive policy implemented by a central authority always yields equalization of private consumption levels across jurisdictions. This result holds whether or not policy makers are able to anticipate migration responses to their policy choices. In the decentralized leadership games, jurisdictions make choices that fully internalize externalities.