Michel Le Breton (International Monetary Fund) Shlomo Weber (International Monetary Fund)
Abstract
In this paper we examine compensation schemes that prevent a threat of secession by any of a country's regions. We prove that, under quite general assumptions on the distribution of citizens' preferences, there exist transfer schemes that are secession-proof. Moreover, we show that these compensation schemes entail a degree of partial equalization among regions: the gap between advantaged regions and disadvantaged regions has to be reduced but it should never be completely eliminated. We demonstrate that in the case of a uniform distribution of the nation's citizens, the secession-proof conditions generate the 50 percent compensation rule for disadvantaged regions. Copyright 2003, International Monetary Fund
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Article provided by International Monetary Fund in its journal IMF Staff Papers.
Volume (Year): 50 (2003) Issue (Month): 3 () Pages: 4 Download reference. The following formats are available: HTML,
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Find related papers by JEL classification: D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
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