39 Pages Posted: 22 Jul 2003
Date Written: May 2003
We model an international union as a group of countries deciding together on the provision of public goods or policies that generate spillovers across members. The trade-off between benefits of coordination and loss of independent policy-making endogenously determines size, composition and scope of the union. Policy uniformity reduces the union's size, may block enlargement processes and induce excessive centralization. We study flexible rules with non-uniform policies that reduce these inefficiencies focusing on arrangements relevant in the context of existing unions or federal states, like enhanced cooperation, subsidiarity, federal mandates and earmarked grants.
Keywords: Federalism, political economy, European Union, international unions
JEL Classification: D78, H11, H41
Suggested Citation: Suggested Citation