- ECONOMIC THEORY Journal
- June 2009
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- Without public goods and under fairly standard assumptions, in Hammond and Sempere (J Pub Econ Theory, 8: 145&-170, 2006) we show that freeing migration enhances the potential Pareto gains from free trade. Here, we present a generalization allowing local public goods subject to congestion. Unlike the standard literature on fiscal externalities, our result relies on fixing both local public goods and congestion levels at their status quo values. This allows constrained efficient and potentially Pareto improving population exchanges regulated only through appropriate residence charges, which can be regarded as Pigouvian congestion taxes.