International Unions

Abstract

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 policymaking 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.

Revisiting the “Decentralization Theorem”—On the role of externalities

“…The central question to be examined in this paper is how the difference in the utility of centralization and decentralization changes with respect to the level of consumption spillovers. 3 Using quasi-linear, iso-elastic preferences, the welfare difference turns out to be non-monotone in the strength of spillovers. A larger amount of spillovers may reduce the welfare differential between centralization and decentralization.…”

“…In fact, more 1 The failure to adapt to taste differences is central to recent analyses of fiscal federalism -see e.g. Alesina and Spolaore (1997), Bolton and Roland (1997), Tabellini (2003), Brueckner (2004), Alesina et al (2005), and Brueckner (2006). 2 The posited trade-off is the essence of much of the discussion not only related to fiscal unions, but also to monetary unions and free-trade areas; see e.g.…”

“…Alesina and Barro (2002). 3 In general, two types of welfare comparisons can be distinguished. The first type looks at the welfare difference as a function of spillovers irrespectively of the sign of the difference.…”

Political geography

“…The model could be extended with spillovers between public good provision in different countries and allowing countries to join in fiscal unions, as in Alesina, Angeloni and Etro (2005). This would allow to study the relationship between size of nations and size of unions.…”

Federations, coalitions, and risk diversification

“…Our objective is to examine when a coalition can potentially be fruitful. 5 Recent contributions include Alesina et al (2005aAlesina et al ( , 2005b Spolaore (2005, 2006).…”