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Negotiating Constitution for Political Unions

  • Vikas Kumar

    (Indira Gandhi Institute of Development Research)

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://www.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
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Handle: RePEc:eab:microe:22386
Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org

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  1. Busch, Lutz-Alexander & Wen, Quan, 1995. "Perfect Equilibria in Negotiation Model," Econometrica, Econometric Society, vol. 63(3), pages 545-65, May.
  2. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(6), pages 657-676.
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  4. 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.
  5. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
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  8. Friedman, David, 1977. "A Theory of the Size and Shape of Nations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 59-77, February.
  9. Ludwig van den Hauwe, 2005. "Constitutional economics," Public Economics 0508010, EconWPA, revised 19 Aug 2005.
  10. Kumar, Vikas, 2011. "Negotiating constitutions for political unions," International Review of Law and Economics, Elsevier, vol. 31(1), pages 58-76, March.
  11. Bordignon, Massimo & Brusco, Sandro, 1999. "Optimal secession rules," ZEW Discussion Papers 99-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Chang, Roberto, 1991. "Bargaining a Monetary Union," Working Papers 91-02, C.V. Starr Center for Applied Economics, New York University.
  13. 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.
  14. Hardman Moore, John & Hart, Oliver, 1985. "Incomplete Contracts and Renegotiation," CEPR Discussion Papers 60, C.E.P.R. Discussion Papers.
  15. Albert Breton, 1964. "The Economics of Nationalism," Journal of Political Economy, University of Chicago Press, vol. 72, pages 376.
  16. Herschel I. Grossman, 2004. "Constitution or Conflict?," Conflict Management and Peace Science, Peace Science Society (International), vol. 21(1), pages 29-42, February.
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