Integration of Asymmetric Nations

28 Pages Posted: 23 Aug 2010

See all articles by Arghya Ghosh

Arghya Ghosh

UNSW Australia Business School, School of Economics

Kieron Meagher

Australian National University (ANU) - School of Economics

Ernie G. S. Teo

NUS Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 22, 2010

Abstract

We examine the incentives for integration between two nations of different sizes in a set up similar to that used by Alesina and Spolaore (2003): individuals are indexed by location, each nation (comprising of individuals) is an interval, and the public good in each nation is provided from its capital located in the middle of the nation. We analyze integration where each country gives up its sovereignty and there is a joint decision about the location of the new nation's capital. We find that integration occurs if the size differences are below a certain threshold. After integration, a new capital is built (in the most efficient location) if the costs of relocating the capital are not too high. The results are robust in a number of plausible decision-making scenarios. Either country can be the major beneficiary, depending on transport and capital maintenance costs.

Keywords: Size of Nations, Integration, Asymmetry, Spatial Public Goods

JEL Classification: C70, H40, L30, R53

Suggested Citation

Ghosh, Arghya and Meagher, Kieron and Teo, Ernie G. S., Integration of Asymmetric Nations (February 22, 2010). Available at SSRN: https://ssrn.com/abstract=1663470 or http://dx.doi.org/10.2139/ssrn.1663470

Arghya Ghosh

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Kieron Meagher

Australian National University (ANU) - School of Economics ( email )

Coombs Building 9
Canberra, Australian Capital Territory 0200
Australia

Ernie G. S. Teo (Contact Author)

NUS Business School ( email )

15 Kent Ridge Drive
119245
Singapore

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