TY  - JOUR
AU  - Alesina,Alberto
AU  - Angeloni,Ignazio
AU  - Etro,Federico
TI  - The Political Economy of International Unions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8645
PY  - 2001
Y2  - December 2001
UR  - http://www.nber.org/papers/w8645
L1  - http://www.nber.org/papers/w8645.pdf
N1  - Author contact info:
Alberto F. Alesina
Department of Economics
Harvard University
Littauer Center 210
Cambridge, MA 02138
Tel: 617/495-8388
Fax: 617/495-7730
E-Mail: aalesina@harvard.edu

Ignazio Angeloni
European Central Bank
Postfach 16 03 19
D-60066 Frankfurt am Main
GERMANY
E-Mail: ignazio.angeloni@ecb.int

Federico Etro
E-Mail: adminseg@unive.it
AB  - 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.
ER  -