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International Unions

Alberto Alesina, Ignazio Angeloni and Federico Etro
The American Economic Review
Vol. 95, No. 3 (Jun., 2005), pp. 602-615
Stable URL: http://www.jstor.org/stable/4132731
Page Count: 14
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International Unions
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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.

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