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Negotiating Constitution for Political Unions

  • Vikas Kumar

    (Indira Gandhi Institute of Development Research)

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    This paper provides a cradle-to-grave model for political union between two unequally endowed states. We introduce negotiated, contested, and time-consistent contested constitutions to address various classes of merger problems. Merger agreement is shown to be path dependent and, in some cases, time inconsistent. The possibility of contest constrains the set of mutually agreeable tax rates and provides stability to a constitution. Demographic heterogeneity constrains the set of mutually agreeable mergers. Rent extracted by technologically advanced province for transferring technology to the backward province in a union is shown to be increasing in complexity of technology but bounded from above. The model can also support the possibility of historical cycles of political geography. The main contribution of this paper is to highlight the role of technology gap and unequal distribution of resources in all the above cases.

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    File URL: http://saber.eaber.org/node/22386
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    Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 22386.

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    Date of creation: Jan 2008
    Handle: RePEc:eab:microe:22386
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    1. Chaim Fershtman, 1986. "The Importance of the Agenda in Bargaining," Discussion Papers 689, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Busch, L-A. & Wen, Q., 1991. "Perfect Equilibria in a Negotiation Model," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9108, University of Western Ontario, The Centre for the Study of International Economic Relations.
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    4. Vikas Kumar, 2008. "Negotiating constitution for political unions," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-026, Indira Gandhi Institute of Development Research, Mumbai, India.
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    13. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
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    17. Putnam, Robert D., 1988. "Diplomacy and domestic politics: the logic of two-level games," International Organization, Cambridge University Press, vol. 42(03), pages 427-460, June.
    18. Robert P. Inman & Daniel L. Rubinfeld, 2008. "Federal Institutions and the Democratic Transition: Learning from South Africa," NBER Working Papers 13733, National Bureau of Economic Research, Inc.
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