The Zollverein and the Formation of a Customs Union

Florian Ploeckl ()

No 2015-08, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: The Zollverein, a customs union, of 1834 was the outcome of sequential accession negotiations between Prussia and other German states. This paper applies a bargaining model to analyse the choices of negotiation structure and institutional form of a customs union. The existence of negative coalition externalities, the effect of a new coalition on non-participants, led the agenda setter, Prussia, to choose sequential over multilateral negotiations. Institutionally a customs union structure provided a higher payoff for the agenda setter than capturing the welfare gains from the differential tariff setting in a free trade agreement, explaining the choice of a customs union.

Pages: 35 pages
Date: 2015-03
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Working Paper: The Zollverein and the Formation of a Customs Union (2010)
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