Advanced Search
MyIDEAS: Login to save this paper or follow this series

Stochastic Shocks and Incentives for (Dis)Integration

Contents:

Author Info

  • Fidrmuc, Jan

Abstract

I present a political economy model of limits to regional redistribution under the threat of secession. The model depicts a union composed of two regions with centralized fiscal policy. The key feature is the trade off between the benefits of secession embodied by autonomous fiscal policy, and the benefits of integration --- efficiency gains and risk sharing. I argue that previously stable unions may disintegrate in response to specific patterns of region-specific output shocks. The decision on secession depends on correlation and persistence of shocks. Integration is sustainable if the shocks are positively correlated and/or transient. On the other hand, the combination of negative correlation and high persistence of the shocks makes integration fragile. Benefits from risk sharing are greatest when shocks are negatively correlated and transient.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepr.org/pubs/dps/DP2104.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2104.

as in new window
Length:
Date of creation: Mar 1999
Date of revision:
Handle: RePEc:cpr:ceprdp:2104

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: Central and Eastern Europe; Disintegration; Median Voter; Optimum Currency Areas; Risk Sharing;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Fidrmuc, J., 1998. "Political Support for Reforms: Economics of Voting in Transition Countries," Discussion Paper 1998-98, Tilburg University, Center for Economic Research.
  2. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2003. "International Unions," Harvard Institute of Economic Research Working Papers 2001, Harvard - Institute of Economic Research.
  3. Enrico Spolaore & Alberto Alesina & Romain Wacziarg, 2000. "Economic Integration and Political Disintegration," American Economic Review, American Economic Association, vol. 90(5), pages 1276-1296, December.
  4. Rodrik, Dani, 1998. "Where Did all the Growth Go? External Shocks, Social Conflict and Growth Collapses," CEPR Discussion Papers 1789, C.E.P.R. Discussion Papers.
  5. Funke, Michael, 1997. "The Nature of Shocks in Europe and in Germany," Economica, London School of Economics and Political Science, vol. 64(255), pages 461-69, August.
  6. Alesina, Alberto & Perotti, Roberto, 1998. "Economic Risk and Political Risk in Fiscal Unions," Economic Journal, Royal Economic Society, vol. 108(449), pages 989-1008, July.
  7. Tamim Bayoumi & Barry Eichengreen, 1992. "Shocking Aspects of European Monetary Unification," NBER Working Papers 3949, National Bureau of Economic Research, Inc.
  8. 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.
  9. Alberto Alesina & Reza Baqir & William Easterly, 1997. "Public Goods and Ethnic Divisions," NBER Working Papers 6009, National Bureau of Economic Research, Inc.
  10. Sachs, Jeffrey & Sala-i-Martin, Xavier, 1992. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe from the United States," CEPR Discussion Papers 632, C.E.P.R. Discussion Papers.
  11. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  12. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
  13. Dixit, Avinash & Londregan, John, 1998. "Fiscal federalism and redistributive politics," Journal of Public Economics, Elsevier, vol. 68(2), pages 153-180, May.
  14. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Economic Structure and the Decision to Adopt a Common Currency," Seminar Papers 611, Stockholm University, Institute for International Economic Studies.
  15. repec:fth:coluec:758 is not listed on IDEAS
  16. Bolton, Patrick & Roland, Gerard & Spolaore, Enrico, 1996. "Economic theories of the break-up and integration of nations," European Economic Review, Elsevier, vol. 40(3-5), pages 697-705, April.
  17. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-46, May.
  18. 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.
  19. Fidrmuc, Jan & Horvath, Julius & Fidrmuc, Jarko, 1999. "Stability of Monetary Unions: Lessons from the Break-up of Czechoslovakia," Transition Economics Series 10, Institute for Advanced Studies.
  20. Alberto Alesina & Enrico Spolaore, 1996. "International Conflict, Defense Spending and the Size of Countries," NBER Working Papers 5694, National Bureau of Economic Research, Inc.
  21. Xavier Sala-i-Martin, 1992. "Transfers," NBER Working Papers 4186, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Fidrmuc, J. & Horváth, J., 1998. "Stability of Monetary Unions: Lessons from the Break-Up of Czechoslovakia," Discussion Paper 1998-74, Tilburg University, Center for Economic Research.
  2. Le Breton, Michel & Weber, Shlomo, 2003. "The Art of Making Everybody Happy : How to Prevent a Secession," IDEI Working Papers 164, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Michel Le Breton & Shlomo Weber, 2001. "The Art of Making Everybody Happy," IMF Working Papers 01/176, International Monetary Fund.
  4. Klaas Staal, 2004. "Country Size and Public Good Provision," Tinbergen Institute Discussion Papers 04-026/1, Tinbergen Institute.
  5. Eerola, Essi & Määttänen, Niku & Poutvaara, Panu, 2004. "Citizens should vote on secession," Munich Reprints in Economics 20524, University of Munich, Department of Economics.
  6. Strobel, Frank, 2005. "Monetary integration and inflation preferences: A real options analysis," European Economic Review, Elsevier, vol. 49(4), pages 845-860, May.
  7. LE BRETON, Michel & WEBER, Shlomo, 2001. "The art of making everybody happy: how to prevent a secession," CORE Discussion Papers 2001011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. K Staal, 2004. "Country size and public good provision," Econometric Society 2004 Australasian Meetings 156, Econometric Society.
  9. Staal, Klaas, 2006. "Country size and publicly provided goods," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 187, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  10. repec:dgr:uvatin:2004026 is not listed on IDEAS

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2104. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.