Enlargement versus Deepening: 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 about 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 size of the union and centralization may be non-monotonic: Up to a certain size of the union enlargement leads to deeper integration,whereas beyond that size further enlargement implies less centralization. We also show that freezing the level of centralization or allowing an associated membership can mitigate the trade-off.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2455.
Date of creation: 2008
Date of revision:
fiscal federalism; policy centralization; political economy;
Other versions of this item:
- Oliver Lorz & Gerald Willmann, 2008. "Enlargement versus Deepening: The Trade-off Facing Economic Unions," Vives discussion paper series 2, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, Vives.
- 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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