The Role of Market Size in the Formation of Jurisdictions
Columbia University - Graduate School of Arts and Sciences, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
CEPR Discussion Paper Series 1429
Administrative and political reorganization is being actively debated even in the mature, stable economies of Western Europe. This paper investigates the possibility of such reorganization being tied to the integration of economic markets. The paper describes the equilibrium of a game where heterogeneous individuals form coalitions for the provision of a public good and where the number and composition of these coalitions depend on the overall size of the market. Changes in the extent of the market put pressure on existing jurisdictions because they change both the desired public goods and, more importantly, the trade-offs that determine the borders of the jurisdictions. Thus individuals will want to renegotiate the agreements that support the existing jurisdictions and form alternative coalitions.
JEL Classification: F15, H41, R12working papers series
Date posted: January 28, 1997
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