Many countries operate pronounced fiscal equalization schemes that shift tax revenue across jurisdictions. We use a general equilibrium model with multiple asymmetric regions, costly trade and labor mobility to carve out the aggregate implications of this policy. Calibrating the model for...

In the European Union, unemployment rates differ markedly across regions, both within and across nations. This study presents a coherent theoretical approach to explain the emergence and persistence of such regional unemployment disparities. The analysis builds on the wage curve literature, and...

The literature on the wage curve provides considerable evidence in favor of a negative relationship between unemployment and wages. It is thus often seen as a refutation of the Harris-Todaro model, who point to a positive relationship. This paper shows that both strands of literature are special...