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Flexible Integration

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  • Bard Harstad

Abstract

For a club such as the European Union, an important question is when, and under which conditions, a subset of the members should be allowed to form "inner clubs" and enhance cooperation. Flexible cooperation allows members to participate if and only if they benefit, but it generates a freerider problem if potential members choose to opt out. The analysis shows that flexible cooperation is better if the heterogeneity is large and the externality small. The best possible symmetric and monotonic participation mechanism, however, is implemented by two thresholds: A mandatory and a minimum participation rule. Rigid and flexible cooperation are both special cases of this mechanism. For each of these thresholds, the optimum is characterized.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1428.

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Date of creation: Oct 2006
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Handle: RePEc:nwu:cmsems:1428

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References

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  1. Jacques Cremer & Thomas R. Palfrey, 2000. "Federal Mandates by Popular Demand," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 905-927, October.
  2. Carlo Carraro & Carmen Marchiori & Sonia Oreffice, 2009. "Endogenous Minimum Participation in International Environmental Treaties," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(3), pages 411-425, March.
  3. Ulrich Erlenmaier & Hans Gersbach, 2001. "Flexible Majority Rules," CESifo Working Paper Series 464, CESifo Group Munich.
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  5. Philippe Aghion & Pol Antràs & Elhanan Helpman, 2004. "Negotiating Free Trade," NBER Working Papers 10721, National Bureau of Economic Research, Inc.
  6. B�rd Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1535-1568, November.
  7. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2003. "International Unions," Harvard Institute of Economic Research Working Papers 2001, Harvard - Institute of Economic Research.
  8. Thygesen, Niels, 1997. "Flexible integration and European monetary union," European Economic Review, Elsevier, vol. 41(3-5), pages 451-459, April.
  9. John B. Burbidge & James A. DePater & Gordon M. Myers & Abhijit Sengupta, 1996. "A Coalition-formation Approach to Equilibrium Federations and Trading Block s," Department of Economics Working Papers 1996-05, McMaster University.
  10. Oran R. Young, 2003. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," Global Environmental Politics, MIT Press, vol. 3(1), pages 145-147, 02.
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  12. Philippe Aghion & Patrick Bolton, 2003. "Incomplete Social Contracts," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 38-67, 03.
  13. Mathias Dewatripont & Francesco Giavazzi & Jürgen von Hagen & Ian Harden & Didier Baudewyns & Gérard Roland & Howard Rosenthal & André Sapir & Guido Tabellini, 1995. "Flexible integration: towards a more effective and democratic Europe," ULB Institutional Repository 2013/9541, ULB -- Universite Libre de Bruxelles.
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Cited by:
  1. Edoardo Di Porto & Federico Revelli, 2009. "Central command, local hazard and the race to the top," Working Papers 2009/26, Institut d'Economia de Barcelona (IEB).

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