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American Economic Review Vol. 95 No. 3 2005

International Unions

Alberto Alesina1; Ignazio Angeloni2; Federico Etro3

1 Department of Economics, Harvard University, Cambridge, MA 02138, National Bureau of Economic Research, and Center for Economic Policy Research. · 2 European Central Bank, Frankfurt am Main, Germany. · 3 Department of Economics, UCSC, Milan, V. Necchi 5, 20123, Italy and Etro Consulting.

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Abstract

We model an international union as a group of countries deciding to centralize the provision of public goods, or policies, that generate externalities across union members. The trade-off between the benefits of coordination and the loss of independent policymaking endogenously determines size, composition, and scope of the union. Policy uniformity reduces the size of the union, may block the entry of new members, and induces excessive centralization. We study flexible rules with nonuniform policies that reduce these inefficiencies, focusing particularly on arrangements that are relevant to the ongoing debate on the institutional structure of the European Union.

DOI
10.1257/0002828054201279
Volume
95
Issue
3
Pages
602-615
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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