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Public Goods in Trade on the Formation of Markets and Jurisdictions

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  • Alessandra Casella

    (Columbia University, GREQAM, NBER, and CEPR, U.S.A.)

  • Jonathan S. Feinstein

    (Yale University, U.S.A.)

Abstract

Must the integration of markets be accompanied by the harmonization of societies' institutions? We study a model of heterogenous individuals where a public good directly affects returns from trade. Trade takes place in the market, whereas the public good is provided by the jurisdiction, and individuals choose which market and which jurisdiction to join. Although trade between different jurisdictions entails transaction costs, only at intermediate market sizes must trading partners belong to a single jurisdiction. When markets are small, multiple jurisdictions can exist, although a single one is preferable; when markets are large, multiple jurisdictions are both possible and desirable. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Suggested Citation

  • Alessandra Casella & Jonathan S. Feinstein, 2002. "Public Goods in Trade on the Formation of Markets and Jurisdictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 437-462, May.
  • Handle: RePEc:ier:iecrev:v:43:y:2002:i:2:p:437-462
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    Citations

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    Cited by:

    1. Kelejian, Harry H. & Murrell, Peter & Shepotylo, Oleksandr, 2013. "Spatial spillovers in the development of institutions," Journal of Development Economics, Elsevier, vol. 101(C), pages 297-315.
    2. repec:spr:sjecst:v:154:y:2018:i:1:d:10.1186_s41937-017-0015-6 is not listed on IDEAS
    3. Zissimos, Ben & Wooders, Myrna, 2005. "Relaxing Tax Competition through Public Good Differentation," The Warwick Economics Research Paper Series (TWERPS) 737, University of Warwick, Department of Economics.
    4. Gino Gancia, 2014. "Globalization and Political Structure," 2014 Meeting Papers 644, Society for Economic Dynamics.
    5. 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 1-4.
    6. Alesina, Alberto & Spolaore, Enrico, 2005. "War, peace, and the size of countries," Journal of Public Economics, Elsevier, vol. 89(7), pages 1333-1354, July.
    7. Marianna Belloc & Samuel Bowles, 2009. "International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity," UMASS Amherst Economics Working Papers 2009-08, University of Massachusetts Amherst, Department of Economics.
    8. Grégoire ROTA-GRAZIOSI, 2006. "Economic integration and political fragmentation," Working Papers 200628, CERDI.
    9. Anwar, Sajid, 2006. "Provision of public infrastructure, foreign investment and welfare in the presence of specialisation-based external economies," Economic Modelling, Elsevier, vol. 23(1), pages 142-156, January.
    10. K Staal, 2004. "Country size and public good provision," Econometric Society 2004 Australasian Meetings 156, Econometric Society.
    11. Wooders, Myrna, 2008. "Market games and clubs," MPRA Paper 33968, University Library of Munich, Germany, revised Dec 2010.
    12. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
      [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]
      ," MPRA Paper 16473, University Library of Munich, Germany.
    13. Yutao Han & Zhen Song, 2017. "On regional integration, fiscal income, and GDP per capita," CEMA Working Papers 600, China Economics and Management Academy, Central University of Finance and Economics.
    14. Nikitas Konstantinidis, 2007. "Gradualism and Uncertainty in International Union Formation," CESifo Working Paper Series 2076, CESifo Group Munich.
    15. Barbara Dluhosch & Daniel Horgos & Klaus W. Zimmermann, 2016. "EU enlargement and satisfaction with democracy: a peculiar case of immiserizing growth," Constitutional Political Economy, Springer, vol. 27(3), pages 273-298, September.
    16. Baniak Andrzej & Grajzl Peter, 2011. "Interjurisdictional Linkages and the Scope for Interventionist Legal Harmonization," Review of Law & Economics, De Gruyter, vol. 7(2), pages 405-434, December.
    17. Nikitas Konstantinidis, 2008. "Gradualism and uncertainty in international union formation: The European Community’s first enlargement," The Review of International Organizations, Springer, vol. 3(4), pages 399-433, December.
    18. Klaas Staal, 2004. "Country Size and Public Good Provision," Tinbergen Institute Discussion Papers 04-026/1, Tinbergen Institute.
    19. Soldatos, Gerasimos T., 2014. "Local Taxation, Private-Public Consumption Complementarity, and the Optimal Number of Jurisdictions," MPRA Paper 60861, University Library of Munich, Germany.
    20. Daumal, Marie, 2008. "Federalism, separatism and international trade," European Journal of Political Economy, Elsevier, vol. 24(3), pages 675-687, September.
    21. Roland Vaubel, 2013. "Secession in the European Union," Economic Affairs, Wiley Blackwell, vol. 33(3), pages 288-302, October.
    22. Stegarescu, Dan, 2004. "Economic Integration and Fiscal Decentralization: Evidence from OECD Countries," ZEW Discussion Papers 04-86, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    23. Dan Stegarescu, 2009. "The effects of economic and political integration on fiscal decentralization: evidence from OECD countries," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 694-718, May.
    24. 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.
    25. Rhea Molato, 2015. "Public Debt and the Threat of Secession," Working Papers tax-mpg-rps-2015-04, Max Planck Institute for Tax Law and Public Finance.

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