The Political Economy of Sustainable Federations

23 Pages Posted: 19 Feb 2001

See all articles by Mark Gradstein

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: July 2000

Abstract

This paper studies a constitutional framework that enables sustainable federative agreements. In the model, districts decide on local policies and envision the possibility of entering a federation. Focusing on rules for legislative bargaining in the federation, I find that a non-egalitarian bargaining rule, which assigns policy making power to one of the district?s representatives is welfare inferior to the decentralized status quo. In contrast, under an egalitarian bargaining procedure, federation yields a welfare superior outcome. The analysis indicates the desirability of making such egalitarian bargaining rules credible.

JEL Classification: D72, H70

Suggested Citation

Gradstein, Mark, The Political Economy of Sustainable Federations (July 2000). Available at SSRN: https://ssrn.com/abstract=260742 or http://dx.doi.org/10.2139/ssrn.260742

Mark Gradstein (Contact Author)

Ben-Gurion University of the Negev - Department of Economics ( email )

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