hal-05125710 Inter-group relocation policies

We analyze the distributional and welfare effects of an inter-group relocation policy in settings featuring strategic spillovers and externalities within and between groups of agents. Conclusions depend on whether in-group interactions feature strategic substitutes or complements, and on whether strategic complements are weak or strong. When groups differ in size, there are welfare gains but the policy is not Pareto improving. When in- and out-group strategic spillovers differ in magnitude, Pareto improving cases exist, and are fully characterized, under in-group strategic substitutes and strong complements. The policy has also a positive welfare effect under weak strategic complements. This case requires a higher degree of heterogeneity in fundamentals for the policy to be Pareto improving.