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On Enhanced Cooperation

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Author Info
Massimo Bordignon ()
Sandro Brusco ()

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Abstract

Should a subset of member states of a federation be allowed to form a sub-union on some policy issue? When centralization is not politically feasible, allowing an enhanced cooperation agreement among a subset of countries permits the latter to gain benefits which would otherwise be lost. However, if in the future the excluded countries also want to join, the fact that a sub-union has been formed in the past may change the status quo to the advantage of the first comers. We show that as long as countries can commit to harmonize at a policy which also takes into account the utility of the excluded country, sub-union formation may be optimal. The relative advantage of a sub-union towards centralization increases when transfers are costly. On the other hand, if commitment is not possible then excluded countries may be penalized. We use these results to discuss of the newly introduced rules for enhanced cooperation agreements in the European Union, suggesting that they might lead to increased centralization.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 996.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_996

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Related research
Keywords: international unions; fiscal federalism; treaty of Nice; corporate taxation;

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Find related papers by JEL classification:
H10 - Public Economics - - Structure and Scope of Government - - - General
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "The Political Economy of International Unions," Harvard Institute of Economic Research Working Papers 1939, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
  2. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "Institutional Rules for Federations," NBER Working Papers 8646, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Guido Tabellini, 2003. "Principles of Policymaking in the European Union: an Economic Perspective," Levine's Working Paper Archive 506439000000000157, David K. Levine. [Downloadable!]
  4. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December. [Downloadable!] (restricted)
  5. Widgrén, Mika, 2001. "Optimal Majority Rules and Enhanced Cooperation," CEPR Discussion Papers 3042, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
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  7. Kevin Roberts, 1999. "Dynamic Voting in Clubs," STICERD - Theoretical Economics Paper Series 367, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  8. Matthias Wrede, 2002. "Small States, Large Unitary States and Federations," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  9. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September. [Downloadable!] (restricted)
  10. Robert P. Inman & Daniel L. Rubinfeld, 1998. "Subsidiarity and the European Union," NBER Working Papers 6556, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marcel Gérard, 2006. "Reforming the Taxation of Multijurisdictional Enterprises in Europe, a Tentative Appraisal," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Marcel Gerard, 2006. "Reforming the taxation of Multijurisdictional Enterprises in Europe, "Coopetition" in a Bottom-up Federation," Working Papers 2006-10, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
    Other versions:
  3. Nikitas Konstantinidis, 2007. "Gradualism and Uncertainty in International Union Formation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2008. "Dynamics and Stability of Constitutions, Coalitions, and Clubs," NBER Working Papers 14239, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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