Small States, Large Unitary States and Federations
Employing a political-economics approach, this paper compares small states and unions when the former fail to internalize cross-border externalities of publicly provided goods. It discusses two types of unions: federations with more than one level of government and unitary states. While unitary states are unable to differentiate public spending according to differing preferences, rents of governments in a federation are higher due to a common-pool problem. The comparison leads to the following results. (1) Citizens prefer small states to large states if spillover effects are weak. (2) They benefit from a multi-level government only if their preferences heavily differ from the median-voter's preferences and if spillovers are strong. Based on this comparison the paper also discusses the creation of unions. Making specific assumption on the distribution of preferences, it analyzes strong Nash equilibria at the union formation stage.
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.:
- John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
- Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001.
"The Political Economy of International Unions,"
Harvard Institute of Economic Research Working Papers
1939, Harvard - Institute of Economic Research.
- Alesina, Alberto F & Angeloni, Ignazio & Etro, Federico, 2001. "The Political Economy of International Unions," CEPR Discussion Papers 3117, C.E.P.R. Discussion Papers.
- Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "The Political Economy of International Unions," NBER Working Papers 8645, National Bureau of Economic Research, Inc.
- Torsten Persson & Gérard Roland & Guido Tabellini, 1997.
"Separation of Powers and Political Accountability,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(4), pages 1163-1202.
- Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
- Matthias Wrede, 2002. "Vertical externalities and control of politicians," Economics of Governance, Springer, vol. 3(2), pages 135-151, 07.
- Bernheim, B. Douglas & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria II. Applications," Journal of Economic Theory, Elsevier, vol. 42(1), pages 13-29, June.
When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:119:y:2004:i:1_2:p:219-240. 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: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.