Political Economy of Fiscal Unions
AbstractI formulate a political-economy model of a fiscal union where the threat of secession imposes a limit on fiscal redistribution between regions. I argue that the trade-off between implementing the region's preferred fiscal policy and benefiting from inter-regional risk sharing depends on the nature of economic shocks. Specifically both correlation of shocks across regions and their persis- tence over time are important. The gains from inter-regional risk sharing are potentially large when shocks are negatively correlated and temporary. In con- trast, unions with negatively correlated permanent shocks are likely to prove politically unviable.
Download InfoIf 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.
Bibliographic InfoPaper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 13-06.
Length: 25 pages
Date of creation: Jul 2013
Date of revision:
Contact details of provider:
Postal: CEDI, Brunel University,West London,UB8 3PH,United Kingdom
Phone: +44 (0)1895 266649
Fax: +44 (0)1895 266649
Web page: http://www.cedi.org.uk
More information through EDIRC
Other versions of this item:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-PBE-2013-07-28 (Public Economics)
- NEP-POL-2013-07-28 (Positive Political Economics)
- NEP-URE-2013-07-28 (Urban & Real Estate Economics)
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.:
- Fidrmuc, J. & Horváth, J., 1998.
"Stability of Monetary Unions: Lessons from the Break-Up of Czechoslovakia,"
1998-74, Tilburg University, Center for Economic Research.
- Fidrmuc, Jan & Horvath, Julius & Fidrmuc, Jarko, 1999. "Stability of monetary unions: Lessons from the break-up of Czechoslovakia," ZEI Working Papers B 17-1999, ZEI - Center for European Integration Studies, University of Bonn.
- 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.
- Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 4.
- Ralf Hepp & Jürgen von Hagen, 2013.
"Interstate risk sharing in Germany: 1970--2006,"
Oxford Economic Papers,
Oxford University Press, vol. 65(1), pages 1-24, January.
- Hepp, Ralf & von Hagen, Jürgen, 2010. "Interstate risk sharing in Germany: 1970-2006," ZEI Working Papers B 03-2010, ZEI - Center for European Integration Studies, University of Bonn.
- Ralf Hepp & Juergen von Hagen, 2010. "Interstate Risk Sharing in Germany: 1970-2006," Working papers 2010-13, University of Connecticut, Department of Economics.
- Ralf Hepp & JÃ¼rgen von Hagen, 2010. "Interstate Risk Sharing in Germany: 1970-2006," Fordham Economics Discussion Paper Series dp2010-04, Fordham University, Department of Economics.
- Hepp, Ralf & von Hagen, Jürgen, 2011. "Interstate Risk Sharing in Germany:1970-2006," CEPR Discussion Papers 8593, C.E.P.R. Discussion Papers.
- Kessler, Anke & Luelfesmann, Christoph & Myers, Gordon M, 2009. "The Architecture of Federations: Constitutions, Bargaining, and Moral Hazard," CEPR Discussion Papers 7244, C.E.P.R. Discussion Papers.
- Alberto Alesina & Roberto Perotti, 1995.
"Economic Risk and Political Risk in Fiscal Unions,"
NBER Working Papers
4992, National Bureau of Economic Research, Inc.
- Becker, Sascha O. & Hoffmann, Mathias, 2006.
"Intra- and international risk-sharing in the short run and the long run,"
European Economic Review,
Elsevier, vol. 50(3), pages 777-806, April.
- Sascha O. Becker & Mathias Hoffmann, 2003. "Intra-and International Risk-Sharing in the Short Run and the Long Run," CESifo Working Paper Series 1111, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarmistha Pal).
If references are entirely missing, you can add them using this form.