An Analysis of Population Mobility under the Social Security Policy

Abstract

Recently, there is observed also in Japan that some elder move to other districts. Although there are many reasons, it seems to be important that the services of social security or social welfare in the district they moved to are better than the initial. Then, the problem is that he or she can obtain the benefit with little burden of cost comparing with natives. (free-rider problem) Another problem is that the residents' benefit from the social security might decrease with increasing in population. (congestion problem)
To analyze this sort of situation, we consider two-district model. There is one central government and two local governments. Each district has one local government. There are rich and poor residents in both districts. Suppose that in the initial, there is the same number of residents in both districts, but over one second of the one district's residents is rich and vice versa, that is, one district is richer than another.
In this paper, we analyze the level of social security (welfare) service and how the residents' move can be as a result in both cases that the central government using conditional matching grants intervenes and not intervenes in the local governments that consider political situation in their districts. In the case she doesn't intervene in, the level of social security (welfare) service become smaller in rich district than social optimal. In poor district, on the other hand, it can be either larger or smaller depending on the income gap and the fraction of rich residents in the district. Comparing these levels between districts, we can see that poor district produces more than rich, thus elders move from rich district to poor district. In the case the central government intervenes, elders move from rich district to poor district also. Service level in poor district is, however, always larger than social optimal independent to the income gap in this case.