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Gradualism and Uncertainty in International Union Formation

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  • Nikitas Konstantinidis
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    Abstract

    This paper introduces a new theoretical framework of international unions qua coalitions of countries adopting a common policy and common supranational institutions. We introduce a general class of non-cooperative spatial bargaining games of coalition formation among three countries in order to examine the endogenous strategic considerations in the creation and enlargement of international unions. Why would we observe a gradualist approach in the formation of the grand coalition even if the latter is assumed to be weakly efficient? We propose uncertainty about the benefits of integration as a mechanism that can generate gradual union formation in equilibrium. As it turns out, it may well be in the ‘core’ countries’ interest to delay the accession of a third, peripheral country in order to i) stack the institutional make-up of the initial union in their favor and ii) signal their high resolve to wait out the expansion of their bilateral subunion. A related case from the European Union provides an interesting illustration.

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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2076.

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    Date of creation: 2007
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    Handle: RePEc:ces:ceswps:_2076

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    1. Bordignon, Massimo & Manasse, Paolo & Tabellini, Guido, 1996. "Optimal Regional Redistribution Under Asymmetric Information," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1437, C.E.P.R. Discussion Papers.
    2. Kevin Roberts, 1999. "Dynamic voting in clubs," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19349, London School of Economics and Political Science, LSE Library.
    3. Wacziarg, Romain & Alesina, Alberto, 1999. "Is Europe Going Too Far?," Scholarly Articles 4553012, Harvard University Department of Economics.
    4. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2005. "International Unions," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 602-615, June.
    5. Bordignon, Massimo & Brusco, Sandro, 2006. "On enhanced cooperation," Journal of Public Economics, Elsevier, Elsevier, vol. 90(10-11), pages 2063-2090, November.
    6. Michele Ruta, 2005. "Economic Theories of Political (Dis)integration," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 19(1), pages 1-21, 02.
    7. Alessandra Casella & Jonathan S. Feinstein, 2002. "Public Goods in Trade on the Formation of Markets and Jurisdictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 437-462, May.
    8. Jacques Cremer & Thomas R. Palfrey, 2000. "Federal Mandates by Popular Demand," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(5), pages 905-927, October.
    9. Seidmann, Daniel J & Winter, Eyal, 1998. "A Theory of Gradual Coalition Formation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(4), pages 793-815, October.
    10. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(3), pages 345-64, July.
    11. Alberto Alesina & Vittorio Grilli, 1993. "On the Feasibility of a One or Multi-Speed European Monetary Union," NBER Working Papers 4350, National Bureau of Economic Research, Inc.
    12. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    13. Peter Cramton, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Papers of Peter Cramton 92res, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
    14. Alesina, Alberto F & Angeloni, Ignazio & Etro, Federico, 2001. "The Political Economy of International Unions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3117, C.E.P.R. Discussion Papers.
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    Cited by:
    1. Maria Bas & Ivan Ledezma, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," CESifo Working Paper Series 2077, CESifo Group Munich.
    2. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
      [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O
      ," MPRA Paper 16473, University Library of Munich, Germany.

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