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Enlargement versus Deepening: The Trade-off Facing Economic Unions

  • Oliver Lorz
  • Gerald Willmann

This paper analyzes the relationship between the size of an economic union and the degree of policy centralization. We consider a political economy setting in which elected representatives bargain over the degree of centralization within the union. In our model strategic delegation affects the identity of the representatives and hence the equilibrium policy outcome. We show that the relationship between the size of the union and centralization may be non-monotonic: Up to a certain size enlargement leads to deeper integration, whereas beyond that size further enlargement implies less centralization. We also show that freezing the level of centralization and associate memberships can mitigate the trade-off.

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File URL: http://feb.kuleuven.be/VIVES/publicaties/discussionpapers/DP/DP2008/vivesdiscussionpaper2.pdf
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Paper provided by KU Leuven, Faculty of Economics and Business, VIVES Research Centre for Regional Economics in its series Working Papers VIVES Research Centre for Regional Economics with number 2.

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Date of creation: 2008
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Handle: RePEc:ete:vivwps:2
Contact details of provider: Web page: https://feb.kuleuven.be/VIVES/vivesenglish/general/

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  1. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
  2. Redoano, Michela & Scharf, Kimberly A., 2004. "The political economy of policy centralization: direct versus representative democracy," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 799-817, March.
  3. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2003. "International Unions," Harvard Institute of Economic Research Working Papers 2001, Harvard - Institute of Economic Research.
  4. Anders Olofsgârd, 2004. "Secessions and Political Extremism: Why Regional Referenda Do Not Solve the Problem," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 805-832, 09.
  5. Torsten Persson & Guido Tabellini, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 689-701.
  6. John Wilson & Eckhard Janeba, 2003. "Decentralization and International Tax Competition," CESifo Working Paper Series 854, CESifo Group Munich.
  7. Guillaume Cheikbossian, 2000. "Federalism, distributive politics and representative democracy," Economics of Governance, Springer, vol. 1(2), pages 105-122, 07.
  8. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems and Public Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 609-657.
  9. R Dur & H.J. Roelfsema, 2004. "Why Does Centralisation Fail to Internalise Policy Externalities?," Working Papers 04-09, Utrecht School of Economics.
  10. Christina Schneider, 2007. "Enlargement processes and distributional conflicts: The politics of discriminatory membership in the European Union," Public Choice, Springer, vol. 132(1), pages 85-102, July.
  11. Lorz, Jens Oliver & Willmann, Gerald, 2004. "On the Endogenous Allocation of Decision Powers in Federal Structures," Center for European, Governance and Economic Development Research Discussion Papers 25, University of Goettingen, Department of Economics.
  12. Giovanni Facchini & Oliver Lorz & Gerald Willmann, 2006. "Asylum seekers in Europe: the warm glow of a hot potato," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 411-430, June.
  13. Wolfgang Buchholz & Alexander Haupt & Wolfgang Peters, 2005. "International Environmental Agreements and Strategic Voting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 175-195, 03.
  14. Michele Ruta, 2005. "Economic Theories of Political (Dis)integration," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 1-21, 02.
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