Size versus scope: on the trade-off facing economic unions
AbstractThis paper analyzes the relationship between the size of an economic union and the degree of policy centralization. We consider a political economy setting in which elected representatives bargain over the degree of centralization within the union. In our model, strategic delegation affects the identity of the representatives, and hence the equilibrium policy outcome. We show that the relationship between the extensive and the intensive margin of centralization may be non-monotonic: Up to a certain threshold a larger size implies deeper integration, whereas beyond that threshold centralization declines with further increases in size. We also show that freezing the level of centralization and associate memberships can mitigate this trade-off. Copyright Springer Science+Business Media, LLC 2013
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Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 20 (2013)
Issue (Month): 2 (April)
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Web page: http://www.springerlink.com/link.asp?id=102915
Fiscal federalism; Policy centralization; Political economy; D78; H77; H87;
Find related papers by JEL classification:
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
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