Interregional interactions and population mobility

With a homogeneous population and perfect population mobility, as conventionally modeled, the following result is derived for a very general class of economics with interregional interactions: a socially efficient outcome is a Nash equilibrium of the game of decentralized and uncoordinated policy setting. However, if decisions about migration take a longer time to make than decisions of policy changes, that general result no longer holds. With this decision sequence, decentralization may also give an inefficient outcome in situations where the decentralized outcome is efficient in the absence Of Population mobility. (C) 2004 Elsevier B.V. All rights reserved.