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Heterogeneity, Vetoes, and Exit Clauses in Federal Systems

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  • Martijn Huysmans

Abstract

The vast majority of federations lack exit clauses. Existing theoretical explanations of this stylized fact focus on issues of credible commitment, signaling, and the risk of strategic exploitation. However, such accounts are unable to explain the adoption by the European Union (EU) of Article 50, which allows withdrawal. I contend and demonstrate empirically that in the case of the EU, an exit-voice logic lies at the basis of Article 50. More generally, in heterogeneous (quasi-)federations formed through voluntary accession, prospective members may require an exit right in order to join, especially if they will not have a veto against policy changes. This hypothesis is borne out empirically by a probit regression on the positions of 94 delegates at the European Convention, which shows that heterogeneity drove support for an exit right.

Suggested Citation

  • Martijn Huysmans, 2018. "Heterogeneity, Vetoes, and Exit Clauses in Federal Systems," CESifo Working Paper Series 7178, CESifo.
    • Handle: RePEc:ces:ceswps:_7178
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7178.pdf
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    References listed on IDEAS

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    Cited by:

    1. Matthew Gould & Matthew D. Rablen, 2019. "Are World Leaders Loss Averse?," CESifo Working Paper Series 7763, CESifo.

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    More about this item

    Keywords

    exit; withdrawal; secession; federalism; European Union;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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