The intuition is that the regionalisation would enhance efficiency and improve the economic situation of agents from the low-unemployment region to the disadvantage of agents from the high-unemployment region. Although the effects are complex and cannot be derived unambiguously, a numerical example shows that the intuition is not true in general. Migration connects the expected utilities of workers from both regions through constant migration costs. Hence, the preferences of workers are marching in step. The higher volume of migration in the case of regional UI budgets leads to a loss of efficiency. A conflict only arises between firms from the rich and from the poor region. Under the restriction to self-financing UI, the regionalisation leads, depending on the assumed regime, either to lower UI taxes or to higher UI benefits in the rich region. Because both parameters have a positive impact on wages under reasonable assumptions, equilibrium wages in the rich region fall in the former case, and rise in the latter. This causes firms to prefer regional UI budgets if the tax rate is endogenous, and to prefer central UI if the benefit rate is endogenous. The inverse is valid for firms from the poor region.
Even though these results hinge partially on assumed functions and parameters, the underlying effects are plausible. Other effects, neglected in these models, may alter our results. Nonetheless, the mere possibility of these results shows that sweeping and intuitive judgements are not appropriate when dealing with this complex subject.