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The Political Economy of Sustainable Federations

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  • Mark Gradstein
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    Abstract

    This paper studies a constitutional framework that enables sustainable federative agreements. In the model, districts decide on local policies and envision the possibility of entering a federation. Focusing on rules for legislative bargaining in the federation, I find that a non-egalitarian bargaining rule, which assigns policy making power to one of the district's representatives is welfare inferior to the decentralized status quo. In contrast, under an egalitarian bargaining procedure, federation yields a welfare superior outcome. The analysis indicates the desirability of making such egalitarian bargaining rules credible.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2000/wp-cesifo-2000-07/cesifo_wp315.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 315.

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    Date of creation: 2000
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    Handle: RePEc:ces:ceswps:_315

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    1. Cremer, Jacques & Palfrey, Thomas R., 1996. "In or out?: Centralization by majority vote," European Economic Review, Elsevier, vol. 40(1), pages 43-60, January.
    2. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    3. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April.
    4. Gradstein, Mark & Justman, Moshe, 2001. "Education, Social Cohesion and Economic Growth," CEPR Discussion Papers 2773, C.E.P.R. Discussion Papers.
    5. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
    6. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May.
    7. Lockwood, B., 1998. "Distributive Politics and the Benefits of Decentralization," The Warwick Economics Research Paper Series (TWERPS) 513, University of Warwick, Department of Economics.
    8. Robert P. Inman & Daniel L. Rubinfeld, 1997. "Rethinking Federalism," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 43-64, Fall.
    9. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1057-90, November.
    10. Crémer, Jacques & Palfrey, Thomas, 1997. "Political Confederation," IDEI Working Papers 72, Institut d'Économie Industrielle (IDEI), Toulouse.
    11. Warneryd, Karl, 1998. "Distributional conflict and jurisdictional organization," Journal of Public Economics, Elsevier, vol. 69(3), pages 435-450, September.
    12. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
    13. Buchanan, James M & Faith, Roger L, 1987. "Secession and the Limits of Taxation: Toward a Theory of Internal Exit," American Economic Review, American Economic Association, vol. 77(5), pages 1023-31, December.
    14. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 979-1009, October.
    15. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Robert Dur & Hein Roelfsema, 2004. "Why does Centralisation Fail to Internalise Policy Externalities?," Working Papers 04-09, Utrecht School of Economics.
    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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