The purpose of this research is to analyze the optimal government behavior using models that account for the imperfect control national or local governments exercise over the movements of individuals across their borders. Three different models are developed each of which addresses a particular aspect of labor mobility. The first analyzes the problems created by the inability of governments to keep migrants outside of their borders. The analysis will identify cases in which attempts to restrict entry are inefficient from the viewpoint of the entire system of regions. Inefficiencies of this type are becoming increasingly important not only within countries, but also in international contexts, such as in Western Europe as it enters into the 1992 Single Market initiative. The second model examines the optimal use of nonlinear income taxation to redistribute income within a region containing interregionally mobile individuals. This research will bring together the literature on optimal income taxation and the provision of public goods. The third model considers the situation where labor mobility among regions is costly and analyzes the ability of independent governments to redistribute income and maintain efficient allocation of labor across regions. This project is important because it will provide a deeper understanding and new insights concerning the impact governmental policy on labor mobility.
