Negotiating constitutions for political unions
This paper provides a cradle-to-grave model of political merger between two states and highlights the role of cross-border disparities in material and technological endowments in state formation. This issue has not received adequate theoretical attention in the existing scholarship that has largely focussed on factors like defence, trade, and public goods provision. In this paper, merger negotiations are modelled using a bilateral bargaining model with inside options and contest as an outside option. It is shown that the threat of contest constrains the set of mutually acceptable taxes and, more importantly, it provides stability to the federal constitution by making the punishment strategy in the secession rule credible. The existence of negotiated and contested constitutional merger agreements that are path dependent but time-consistent is shown. Also, the rent extracted by the advanced province in the union for transferring technology to the backward province is shown to be increasing in the complexity of technology but bounded from above. Finally, the impact of demographic heterogeneity on the feasibility of inter-state mergers is discussed.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- 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.
- Herschel I. Grossman, 2004.
"Constitution or Conflict?,"
Conflict Management and Peace Science,
Peace Science Society (International), vol. 21(1), pages 29-42, February.
- Chang Roberto, 1995.
"Bargaining a Monetary Union,"
Journal of Economic Theory,
Elsevier, vol. 66(1), pages 89-112, June.
- Ludwig van den Hauwe, 2005. "Constitutional economics," Public Economics 0508010, EconWPA, revised 19 Aug 2005.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- 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.
- Anbarci, N. & Skaperdas, S. & Syropoulos, C., 2000. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms Against Threats Can Have Real Effects," Papers 00-01-19, California Irvine - School of Social Sciences.
- repec:cup:cbooks:9780521855266 is not listed on IDEAS
- Albert Breton, 1964. "The Economics of Nationalism," Journal of Political Economy, University of Chicago Press, vol. 72, pages 376.
- Bulow, Jeremy & Rogoff, Kenneth S., 1989.
"A Constant Recontracting Model of Sovereign Debt,"
12491028, Harvard University Department of Economics.
- 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.
- Jeremy I. Bulow & Kenneth Rogoff, 1986. "A Constant Recontracting Model of Sovereign Debt," NBER Working Papers 2088, National Bureau of Economic Research, Inc.
- Vikas Kumar, 2008.
"Negotiating Constitution for Political Unions,"
- Vikas Kumar, 2008. "Negotiating Constitution for Political Unions," Microeconomics Working Papers 22386, East Asian Bureau of Economic Research.
- Vikas Kumar, 2008. "Negotiating constitution for political unions," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-026, Indira Gandhi Institute of Development Research, Mumbai, India.
- 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.
- Oliver Hart & John Moore, 1985.
"Incomplete Contracts and Renegotiation,"
367, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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.
- Chaim Fershtman, 1986.
"The Importance of the Agenda in Bargaining,"
689, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bordignon, Massimo & Brusco, Sandro, 1999.
"Optimal secession rules,"
ZEW Discussion Papers
99-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- 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.
- Stergios Skaperdas, 2006.
"Bargaining Versus Fighting,"
060705, University of California-Irvine, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:31:y:2011:i:1:p:58-76. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.