The Political Economy of International Unions

Alberto Alesina, Ignazio Angeloni () and Federico Etro ()

No 8645, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We model an international union as a group of countries deciding together the provision of certain public goods and policies because of spillovers. The countries are heterogeneous either in preferences and/or in economic fundamentals. The trade off between the benefits of coordination and the loss of independent policymaking endogenously determines the size, the composition and the scope of unions. Our model implies that the equilibrium size of the union is inversely related to the degree of heterogeneity between countries and to the spectrum of common policies. Hence, there is a trade off between enlargement and deepening of coordination: a union involved in too many collateral activities will be favored by few countries, while a union which focuses on a core of activities will be favored by many countries. However the political equilibrium implies a bias toward excessive centralization and small size of the union. This bias can be corrected if there is a constitutional commitment of the union to centralize only certain policies.

JEL-codes: F2 F42 (search for similar items in EconPapers)
Date: 2001-12
New Economics Papers: this item is included in nep-cwa and nep-lam
Note: EFG ME PE
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Citations: View citations in EconPapers (41)

Published as Alesina, Alberto, Ignazio Angeloni and Federico Etro. “International Unions." American Economic Review 95 (June 2005): 602-15.

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Related works:
Working Paper: The Political Economy of International Unions (2001)
Working Paper: The Political Economy of International Unions (2001)
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