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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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References

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  1. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(6), pages 657-676.
  2. Kumar, Vikas, 2011. "Negotiating constitutions for political unions," International Review of Law and Economics, Elsevier, vol. 31(1), pages 58-76, March.
  3. Herschel Grossman, 2002. "Constitution or Conflict?," Working Papers 2002-01, Brown University, Department of Economics.
  4. Jeremy A.Rogoff Bulow & Kenneth, 1986. "A Constant Recontracting Model of Sovereign Debt," University of Chicago - George G. Stigler Center for Study of Economy and State 43, Chicago - Center for Study of Economy and State.
  5. 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.
  6. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
  7. Ludwig van den Hauwe, 2005. "Constitutional economics," Public Economics 0508010, EconWPA, revised 19 Aug 2005.
  8. 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.
  9. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  10. Fershtman, Chaim, 1990. "The importance of the agenda in bargaining," Games and Economic Behavior, Elsevier, vol. 2(3), pages 224-238, September.
  11. Bulow, Jeremy & Rogoff, Kenneth S., 1989. "A Constant Recontracting Model of Sovereign Debt," Scholarly Articles 12491028, Harvard University Department of Economics.
  12. Roberto Chang, 1994. "Bargaining a monetary union," Working Paper 94-4, Federal Reserve Bank of Atlanta.
  13. 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.
  14. Bordignon, Massimo & Brusco, Sandro, 2001. "Optimal secession rules," European Economic Review, Elsevier, vol. 45(10), pages 1811-1834, December.
  15. Hardman Moore, John & Hart, Oliver, 1985. "Incomplete Contracts and Renegotiation," CEPR Discussion Papers 60, C.E.P.R. Discussion Papers.
  16. 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.
  17. Albert Breton, 1964. "The Economics of Nationalism," Journal of Political Economy, University of Chicago Press, vol. 72, pages 376.
  18. 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.
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Cited by:
  1. Kumar, Vikas, 2011. "Negotiating constitutions for political unions," International Review of Law and Economics, Elsevier, vol. 31(1), pages 58-76, March.

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