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Political Bargaining in a Federation: Buchanan meets Coase

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  • Gradstein, Mark

Abstract

In recent decades, the issues of federalism and political integration have gained prominence in public debate as well as in the academic realm. A frequently made point is that allowing free secession may protect the minority?s interests, thus providing it with an incentive to enter the federation. This Paper explicitly considers the political process in the federation arguing that the option to secede may distort the political choices made by the individual regions to improve their bargaining positions. As a result, the allocation of resources in the federation could well end up being inefficient and unattractive for the minority region. In contrast, limiting the secession possibilities by requiring the consent of a majority of voters through a regional referendum, rather than leaving it to the discretion of the legislature, restores efficiency.

Suggested Citation

  • Gradstein, Mark, 2004. "Political Bargaining in a Federation: Buchanan meets Coase," CEPR Discussion Papers 4188, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4188
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    More about this item

    Keywords

    Federation; Secession;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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