We study a model with free migration between a rich and a poor region. Since there is congestion, the rich region has an incentive to give the poor region a transfer in order to reduce immigration. Faced with free migration, the rich region voluntarily chooses a transfer, which turns out to be...

We develop a model with optimal shares of intergovernmental transfers, and we apply a simulation analysis of our model for the case of Mexico. The main outcomes of this paper are as follows: First, we provide optimal shares of intergovernmental funds to be allocated in each state considering the...