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Bicameral bargaining and federation formation

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  • Ross Hickey

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Abstract

This paper takes a political economy approach to fiscal centralisation through federation formation. We analyse a two-region model of federalism with inter-regional policy spillovers. Departing from a state of independence with decentralised provision of public policy, we analyse the proposed formation of a federation to internalise the spillovers. We consider equilibrium allocations under alternative institutional environments involving: simple majority voting, a restriction of uniform taxation, and regional bargaining through a bicameral legislature. Bicameralism facilitates federation formation for the largest set of parameter values of the model, which is consistent with the observation that bicameralism and federalism often appear together. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Ross Hickey, 2013. "Bicameral bargaining and federation formation," Public Choice, Springer, vol. 154(3), pages 217-241, March.
  • Handle: RePEc:kap:pubcho:v:154:y:2013:i:3:p:217-241
    DOI: 10.1007/s11127-011-9815-x
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
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    9. Gradstein, Mark, 2004. "Political bargaining in a federation: Buchanan meets Coase," European Economic Review, Elsevier, vol. 48(5), pages 983-999, October.
    10. Ernst Maug & Bilge Yilmaz, 2002. "Two-Class Voting: A Mechanism for Conflict Resolution," American Economic Review, American Economic Association, vol. 92(5), pages 1448-1471, December.
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    Citations

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    Cited by:

    1. Giovanni Facchini & Cecilia Testa, 2016. "Corruption and bicameral reforms," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(2), pages 387-411, August.
    2. Lisa Grazzini & Alessandro Petretto, 2017. "Spillover Effects in a Federal Country with Vertical Tax Externalities," Public Finance Review, , vol. 45(5), pages 701-720, September.
    3. De Borger, Bruno & Proost, Stef, 2015. "The political economy of public transport pricing and supply decisions," Economics of Transportation, Elsevier, vol. 4(1), pages 95-109.
    4. Dongwon Lee, 2016. "Supermajority rule and bicameral bargaining," Public Choice, Springer, vol. 169(1), pages 53-75, October.
    5. Alexander Salter, 2015. "Calhoun’s concurrent majority as a generality norm," Constitutional Political Economy, Springer, vol. 26(3), pages 375-390, September.
    6. Bruno Borger & Stef Proost, 2016. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(5), pages 934-959, October.
    7. De Borger, Bruno & Proost, Stef, 2016. "Can we leave road pricing to the regions? -The role of institutional constraints," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 208-222.
    8. Petra Ens, 2009. "Tax competition and equalization: the impact of voluntary cooperation on the efficiency goal," Working Papers 2009/16, Institut d'Economia de Barcelona (IEB).

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