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Political Bargaining in a Federation: Buchanan meets Coase

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  • Gradstein, Mark

Abstract

In recent decades, the issues of federalism and political integration have gained prominence in public debate as well as in the academic realm. A frequently made point is that allowing free secession may protect the minority’s interests, thus providing it with an incentive to enter the federation. This Paper explicitly considers the political process in the federation arguing that the option to secede may distort the political choices made by the individual regions to improve their bargaining positions. As a result, the allocation of resources in the federation could well end up being inefficient and unattractive for the minority region. In contrast, limiting the secession possibilities by requiring the consent of a majority of voters through a regional referendum, rather than leaving it to the discretion of the legislature, restores efficiency.

Suggested Citation

  • Gradstein, Mark, 2004. "Political Bargaining in a Federation: Buchanan meets Coase," CEPR Discussion Papers 4188, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4188
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    References listed on IDEAS

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    8. Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
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    Cited by:

    1. Berglöf, Erik & Burkart, Mike & Friebel, Guido & Paltseva, Elena, 2012. "Club-in-the-club: Reform under unanimity," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 492-507.
    2. Libman, Alexander, 2009. "Russian federalism and post-Soviet integration: Divergence of development paths," MPRA Paper 12944, University Library of Munich, Germany.
    3. Grégoire Rota Graziosi, 2009. "On the Strategic Use of Representative Democracy in International Agreements," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(2), pages 281-296, April.
    4. 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.
    5. Eerola Essi & Määttänen Niku & Poutvaara Panu, 2004. "Citizens Should Vote on Secession," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-22, October.
    6. Knoll Bodo & Koenig Andreas, 2011. "Leviathan Europa – Stärkung der Nationalstaaten und der EU durch konstitutionelle Schranken?," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 60(2), pages 127-145, August.
    7. Grégoire Rota Graziosi, 2007. "Secession and the Limits of Taxation: Toward a Theory of Internal Exit: Comment," American Economic Review, American Economic Association, vol. 97(1), pages 534-538, March.
    8. Harstad, Bård, 2010. "Strategic delegation and voting rules," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 102-113, February.
    9. Gregoire Rota Graziosi, 2003. "The theory of `Internal Exit', a comment on Buchanan and Faith (1987)," Economics Bulletin, AccessEcon, vol. 8(12), pages 1-6.
    10. Noriaki Matsushima & Ryusuke Shinohara, 2015. "The efficiency of monopolistic provision of public goods through simultaneous bilateral bargaining," ISER Discussion Paper 0948, Institute of Social and Economic Research, Osaka University.
    11. Hana Lipovská, 2016. "European Secession: Economic Integration on the Road to the Political Desintegration," Současná Evropa, University of Economics, Prague, vol. 2016(1), pages 29-41.
    12. Vincent Anesi & Philippe De Donder, 2011. "Voting under the Threat of Secession: Accommodation vs. Repression," CESifo Working Paper Series 3458, CESifo Group Munich.
    13. Ross Hickey, 2013. "Bicameral bargaining and federation formation," Public Choice, Springer, vol. 154(3), pages 217-241, March.
    14. repec:spr:sjecst:v:154:y:2018:i:1:d:10.1186_s41937-017-0015-6 is not listed on IDEAS
    15. Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, vol. 23(4), pages 302-336, December.
    16. Federico Etro, 2003. "Globalization and Political Geography," CESifo Working Paper Series 986, CESifo Group Munich.
    17. Anesi, Vincent, 2012. "Secessionism and minority protection in an uncertain world," Journal of Public Economics, Elsevier, vol. 96(1), pages 53-61.
    18. Alexander Libman, 2015. "Words or deeds: what matters? On the role of symbolic action in political decentralization," Empirical Economics, Springer, vol. 49(3), pages 801-838, November.
    19. Loeper, Antoine, 2017. "Cross-border externalities and cooperation among representative democracies," European Economic Review, Elsevier, vol. 91(C), pages 180-208.
    20. Hans-Günter Krüsselberg, 2005. "Milton Friedman und der Wissenschaftliche Beirat für Familienfragen Elternkompetenz und Anteilscheine am Schulbudget – Gedanken über Reformpotenziale," Marburg Working Papers on Economics 200506, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    federation; secession;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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