Growth, inequality and integration: a political economy analysis

Hubert Kempf () and Stéphane Rossignol

Post-Print from HAL

Abstract: The issue of political integration between two countries (more generally two political constituencies) for economic reasons is studied within the context of a simple endogenous growth model with a productive public good financed by taxation. We consider two countries which initially differ in terms of average endowment, size and inequality. Because taxation affects the distribution of income both within and betweencountries, we are able to show how integration impacts it over the entire time horizon. The decision to integrate or not is made by the two national median voters.We establish the net gain for any individual in any country derived from integration and offer two alternative decompositions of this gain. It is then proven that even though integration generates aggregate gains for both countries through an endogenous growth mechanism related to size, it may be in the interest of either median voter not to vote for integration given the transformation in the inequality schedule it implies. Surprisingly, even the poorer median voter may vote against integration. Turning to the process of union building, we prove that, once it is decided, integrationis irreversible. Countries may initially decide against integration, yet be willing to reverse this decision in a subsequent period.

Keywords: Political economy of integration; growth and integration; Inequality and growth (search for similar items in EconPapers)
Date: 2005-12
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Public Economic Theory, 2005, 7 (5), pp.709-739. ⟨10.1111/j.1467-9779.2005.00241.x⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Growth, Inequality, and Integration: A Political Economy Analysis (2005)
Working Paper: Growth, inequality and integration: a political economy analysis (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00177256

DOI: 10.1111/j.1467-9779.2005.00241.x

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().