The Art of Making Everybody Happy: How to Prevent a Secession
In this paper we consider a model of the country with heterogeneous population and examine compensation schemes that may prevent a threat of secession by dissatisfied regions. We show that horizontal imbalances are combatable with secession-proof compensation schemes that entail a degree of partial equalization: the disadvantageous regions should be subsidized but the burden on advantageous regions should not be too excessive. In the case of uniform distribution, we establish the 50-percent compensation rule for disadvantageous regions. Thus, we argue for a limited gap reduction between advantageous and disadvantageous regions and show that neither laissez faire nor Rawlsian allocation is secession-proof.
|Date of creation:||01 Nov 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fidrmuc, Jan, 1999. "Stochastic Shocks and Incentives for (Dis)Integration," CEPR Discussion Papers 2104, C.E.P.R. Discussion Papers.
- Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-46, May.
- Alberto Alesina & Enrico Spolaore, 1996. "International Conflict, Defense Spending and the Size of Countries," NBER Working Papers 5694, National Bureau of Economic Research, Inc.
- Guesnerie Roger & Oddou Claude, 1979.
"Second best taxation as a game,"
CEPREMAP Working Papers (Couverture Orange)
- Caplin, Andrew & Nalebuff, Barry, 1991.
"Aggregation and Social Choice: A Mean Voter Theorem,"
Econometric Society, vol. 59(1), pages 1-23, January.
- Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Social Choice: A Mean Voter Theorem," Cowles Foundation Discussion Papers 938, Cowles Foundation for Research in Economics, Yale University.
- Caplin, A. & Nalebuff, B., 1989. "Aggregation And Social Choice: A Mean Voter Theorem," Discussion Papers 1989_31, Columbia University, Department of Economics.
- Wittman, Donald, 1991. "Nations and States: Mergers and Acquisitions; Dissolutions and Divorce," American Economic Review, American Economic Association, vol. 81(2), pages 126-29, May.
- Weber, Shlomo, 1992. "On Hierarchical Spatial Competition," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 407-25, April.
- Bolton, Patrick & Roland, Gerard, 1996. "Distributional Conflicts, Factor Mobility, and Political Integration," American Economic Review, American Economic Association, vol. 86(2), pages 99-104, May.
- Casella, Alessandra & Feinstein, Jonathan, 1991.
"Public Goods in Trade: On the Formation of Markets and Political Jurisdictions,"
CEPR Discussion Papers
511, C.E.P.R. Discussion Papers.
- Alessandra Casella & Jonathan S. Feinstein, 1990. "Public Goods in Trade: On the Formation of Markets and Political Jurisdictions," NBER Working Papers 3554, National Bureau of Economic Research, Inc.
- Jehiel, Philippe & Scotchmer, Suzanne, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 393-413, April.
- Wacziarg, Romain & Spolaore, Enrico & Alesina, Alberto, 2000.
"Economic Integration and Political Disintegration,"
4553029, Harvard University Department of Economics.
- Casella, Alessandra, 1992. "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity," American Economic Review, American Economic Association, vol. 82(2), pages 115-21, May.
- Bordignon, Massimo & Brusco, Sandro, 2001.
"Optimal secession rules,"
European Economic Review,
Elsevier, vol. 45(10), pages 1811-1834, December.
- Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
- 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.
- Buchanan, James M & Faith, Roger L, 1987. "Secession and the Limits of Taxation: Toward a Theory of Internal Exit," American Economic Review, American Economic Association, vol. 77(5), pages 1023-31, December.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:01/176. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.