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Enlargement versus Deepening: The Trade-off Facing Economic Unions

Author

Listed:
  • Oliver Lorz
  • Gerald Willmann

Abstract

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.

Suggested Citation

  • Oliver Lorz & Gerald Willmann, 2008. "Enlargement versus Deepening: The Trade-off Facing Economic Unions," Working Papers of VIVES - Research Centre for Regional Economics 2, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    • Handle: RePEc:ete:vivwps:2
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    Cited by:

    1. 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.
    2. Harstad, Bård, 2010. "Strategic delegation and voting rules," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 102-113, February.

    More about this item

    Keywords

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    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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