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Political Bargaining in a Federation: Buchanan meets Coase

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  • Gradstein, Mark

Abstract

In recent decades, the issues of federalism and political integration have gained prominence in public debate as well as in the academic realm. A frequently made point is that allowing free secession may protect the minority’s interests, thus providing it with an incentive to enter the federation. This Paper explicitly considers the political process in the federation arguing that the option to secede may distort the political choices made by the individual regions to improve their bargaining positions. As a result, the allocation of resources in the federation could well end up being inefficient and unattractive for the minority region. In contrast, limiting the secession possibilities by requiring the consent of a majority of voters through a regional referendum, rather than leaving it to the discretion of the legislature, restores efficiency.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4188.

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Date of creation: Jan 2004
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Handle: RePEc:cpr:ceprdp:4188

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Keywords: federation; secession;

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References

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  1. Casella, Alessandra, 1990. "Participation in a Currency Union," CEPR Discussion Papers, C.E.P.R. Discussion Papers 395, C.E.P.R. Discussion Papers.
  2. Persson, Torsten & Tabellini, Guido, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(4), pages 689-701, October.
  3. 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.
  4. Wärneryd, Karl, 1997. "Distributional Conflict and Jurisdictional Organization," Working Paper Series in Economics and Finance 173, Stockholm School of Economics.
  5. Bordignon, Massimo & Brusco, Sandro, 1999. "Optimal secession rules," ZEW Discussion Papers 99-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(4), pages 1169-89, November.
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  8. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May.
  9. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1057-90, November.
  10. Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
  11. 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.
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Citations

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Cited by:
  1. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]
    ," MPRA Paper 16473, University Library of Munich, Germany.
  2. Vincent Anesi, 2010. "Secessionism and Minority Protection in an Uncertain World," Discussion Papers, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham 2010-15, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  3. Erik Berglöf & Mike Burkart & Guido Friebel & Elena Paltseva, 2009. "Club-in-the-Club: Reform under Unanimity," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 2009-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  4. Hans-Günter Krüsselberg, 2005. "Milton Friedman und der Wissenschaftliche Beirat für Familienfragen Elternkompetenz und Anteilscheine am Schulbudget – Gedanken über Reformpotenziale," Marburg Working Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 200506, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, Springer, vol. 23(4), pages 302-336, December.
  6. Vincent Anesi & Philippe De Donder, 2011. "Voting under the Threat of Secession: Accommodation vs. Repression," CESifo Working Paper Series 3458, CESifo Group Munich.
  7. Bodo Knoll & Andreas Koenig, 2010. "Leviathan Europa - Stärkung der Nationalstaaten und der EU durch konstitutionelle Schranken?," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim, Department of Economics, University of Hohenheim, Germany 321/2010, Department of Economics, University of Hohenheim, Germany.
  8. Ross Hickey, 2013. "Bicameral bargaining and federation formation," Public Choice, Springer, Springer, vol. 154(3), pages 217-241, March.
  9. Gr�goire Rota Graziosi, 2007. "Secession and the Limits of Taxation: Toward a Theory of Internal Exit: Comment," American Economic Review, American Economic Association, vol. 97(1), pages 534-538, March.
  10. Eerola, Essi & Määttänen, Niku & Poutvaara, Panu, 2004. "Citizens should vote on secession," Munich Reprints in Economics, University of Munich, Department of Economics 20524, University of Munich, Department of Economics.
  11. Libman, Alexander, 2009. "Russian federalism and post-Soviet integration: Divergence of development paths," MPRA Paper 12944, University Library of Munich, Germany.
  12. Bard Hastad, 2007. "Strategic Delegation and Voting Rules," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1442, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Federico Etro, 2003. "Globalization and Political Geography," CESifo Working Paper Series 986, CESifo Group Munich.

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