Transfers in a polarized country: bridging the gap between efficiency and stability

Ori Haimanko (), Michel Le Breton and Shlomo Weber ()

No 2002018, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider a political economy model of country whose citizens have heterogeneous preferences for a national policy and some regions may contemplate a threat of secession. The country is efficient if its break-up into smaller countries leads to aggregate utility loss. We show that in an efficient country whose citizens' preferences exhibit a high degree of polarization, a threat of secession cannot be eliminated without interregional transfers. We also demonstrate that, if majority voting is used to determine the redistribution schemes within the country, then a high degree of polarization yields the full compensation scheme as the unique political equilibrium.

Keywords: tranfers; polarization; secession; e?ciency; stability; political equilibrium (search for similar items in EconPapers)
JEL-codes: D70 D73 H20 (search for similar items in EconPapers)
Date: 2002-04
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Transfers in a polarized country: bridging the gap between efficiency and stability (2005)
Working Paper: Transfers in a polarized country: bridging the gap between efficiency and stability (2005)
Working Paper: Transfers in a Polarized Country: Bridging the Gap between Efficiency and Stability (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2002018

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