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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 Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2008-026.

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Length: 58 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:ind:igiwpp:2008-026

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Keywords: Bargaining; Constitution; Contest; Political Union;

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References

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  1. Roberto Chang, 1994. "Bargaining a monetary union," Working Paper 94-4, Federal Reserve Bank of Atlanta.
  2. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-78, February.
  3. 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.
  4. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July.
  5. Albert Breton, 1964. "The Economics of Nationalism," Journal of Political Economy, University of Chicago Press, vol. 72, pages 376.
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  7. Bulow, Jeremy & Rogoff, Kenneth S., 1989. "A Constant Recontracting Model of Sovereign Debt," Scholarly Articles 12491028, Harvard University Department of Economics.
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  9. 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.
  10. Vikas Kumar, 2008. "Negotiating Constitution for Political Unions," Working Papers id:1797, eSocialSciences.
  11. Herschel I. Grossman, 2004. "Constitution or Conflict?," Conflict Management and Peace Science, Peace Science Society (International), vol. 21(1), pages 29-42, February.
  12. Bordignon, Massimo & Brusco, Sandro, 1999. "Optimal secession rules," ZEW Discussion Papers 99-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. 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.
  14. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
  15. Fershtman, Chaim, 1990. "The importance of the agenda in bargaining," Games and Economic Behavior, Elsevier, vol. 2(3), pages 224-238, September.
  16. Ludwig van den Hauwe, 2005. "Constitutional economics," Public Economics 0508010, EconWPA, revised 19 Aug 2005.
  17. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Working Papers 060705, University of California-Irvine, Department of Economics.
  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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