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The Art of Making Everybody Happy: How to Prevent a Secession

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  • Mr. Michel Le Breton
  • Mr. Shlomo Weber

Abstract

In this paper we consider a model of the country with heterogeneous population and examine compensation schemes that may prevent a threat of secession by dissatisfied regions. We show that horizontal imbalances are combatable with secession-proof compensation schemes that entail a degree of partial equalization: the disadvantageous regions should be subsidized but the burden on advantageous regions should not be too excessive. In the case of uniform distribution, we establish the 50-percent compensation rule for disadvantageous regions. Thus, we argue for a limited gap reduction between advantageous and disadvantageous regions and show that neither laissez faire nor Rawlsian allocation is secession-proof.

Suggested Citation

  • Mr. Michel Le Breton & Mr. Shlomo Weber, 2001. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Working Papers 2001/176, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/176
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    References listed on IDEAS

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    Cited by:

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    2. Alesina, Alberto & Spolaore, Enrico, 2005. "War, peace, and the size of countries," Journal of Public Economics, Elsevier, vol. 89(7), pages 1333-1354, July.
    3. Mr. Ehtisham Ahmad & Mr. Raju J Singh, 2003. "Political Economy of Oil-Revenue Sharing in a Developing Country: Illustrations from Nigeria," IMF Working Papers 2003/016, International Monetary Fund.
    4. Casella, Alessandra, 2005. "Redistribution policy: A European model," Journal of Public Economics, Elsevier, vol. 89(7), pages 1305-1331, July.
    5. K Staal, 2004. "Country size and public good provision," Econometric Society 2004 Australasian Meetings 156, Econometric Society.
    6. Santiago Lago Peñas, 2002. "Nivelación interterritorial e ineficiencia de las decisiones presupuestarias: reflexiones para el caso español," Hacienda Pública Española / Review of Public Economics, IEF, vol. 162(3), pages 79-100, ¨Septembe.
    7. Robert Dur & Klaas Staal, 2003. "National Interference in Local Public Good Provision," Tinbergen Institute Discussion Papers 03-074/1, Tinbergen Institute.
    8. Ferrario, Caterina & Zanardi, Alberto, 2011. "Fiscal decentralization in the Italian NHS: What happens to interregional redistribution?," Health Policy, Elsevier, vol. 100(1), pages 71-80, April.
    9. Joan Costa Font & Ramon Tremosa Balcells, 2006. "National Identity and the Preference for State Opting-Out in the Basque Country," Working Papers in Economics 151, Universitat de Barcelona. Espai de Recerca en Economia.
    10. Klaas Staal, 2004. "Country Size and Public Good Provision," Tinbergen Institute Discussion Papers 04-026/1, Tinbergen Institute.
    11. 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.

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