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Negotiating Constitution for Political Unions

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  • Vikas Kumar

    (Indira Gandhi Institute of Development Research)

Abstract

This paper provides a cradle-to-grave model for political union between two unequally endowed states. We introduce negotiated, contested, and time-consistent contested constitutions to address various classes of merger problems. Merger agreement is shown to be path dependent and, in some cases, time inconsistent. The possibility of contest constrains the set of mutually agreeable tax rates and provides stability to a constitution. Demographic heterogeneity constrains the set of mutually agreeable mergers. Rent extracted by technologically advanced province for transferring technology to the backward province in a union is shown to be increasing in complexity of technology but bounded from above. The model can also support the possibility of historical cycles of political geography. The main contribution of this paper is to highlight the role of technology gap and unequal distribution of resources in all the above cases.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 22386.

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Date of creation: Jan 2008
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Handle: RePEc:eab:microe:22386

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Keywords: Bargaining; Constitution; Contest; Political Union;

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  1. Jeremy I. Bulow & Kenneth Rogoff, 1987. "A Constant Recontracting Model of Sovereign Debt," NBER Working Papers 2088, National Bureau of Economic Research, Inc.
  2. Albert Breton, 1964. "The Economics of Nationalism," Journal of Political Economy, University of Chicago Press, vol. 72, pages 376.
  3. Roberto Chang, 1994. "Bargaining a monetary union," Working Paper 94-4, Federal Reserve Bank of Atlanta.
  4. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
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  6. Friedman, David, 1977. "A Theory of the Size and Shape of Nations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 59-77, February.
  7. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(6), pages 657-676.
  8. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  9. Herschel I. Grossman, 2002. "Constitution or Conflict?," NBER Working Papers 8733, National Bureau of Economic Research, Inc.
  10. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
  11. Busch, L-A. & Wen, Q., 1991. "Perfect Equilibria in a Negotiation Model," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9108, University of Western Ontario, The Centre for the Study of International Economic Relations.
  12. Oliver Hart & John Moore, 1985. "Incomplete Contracts and Renegotiation," Working papers 367, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Ludwig van den Hauwe, 2005. "Constitutional economics," Public Economics 0508010, EconWPA, revised 19 Aug 2005.
  14. Chaim Fershtman, 1986. "The Importance of the Agenda in Bargaining," Discussion Papers 689, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Robert P. Inman & Daniel L. Rubinfeld, 2008. "Federal Institutions and the Democratic Transition: Learning from South Africa," NBER Working Papers 13733, National Bureau of Economic Research, Inc.
  16. Putnam, Robert D., 1988. "Diplomacy and domestic politics: the logic of two-level games," International Organization, Cambridge University Press, vol. 42(03), pages 427-460, June.
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