Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10479578 | Journal of Public Economics | 2005 | 27 Pages |
Abstract
We consider a political economy model of country whose citizens have heterogeneous preferences for a national policy and some regions may contemplate a threat of secession. The country is efficient if its breakup into smaller countries leads to an aggregate utility loss. We show that in an efficient country whose citizens' preferences exhibit a high degree of polarization, a threat of secession cannot be eliminated without inter-regional transfers. We also demonstrate that if majority voting is used to determine the redistribution schemes within the country, then a high degree of polarization yields the full-compensation scheme as the unique political equilibrium.
Related Topics
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Authors
Ori Haimanko, Michel Le Breton, Shlomo Weber,