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    <title>EconStor Collection: Discussion Papers, Abteilung Ökonomik des Wandels, WZB</title>
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      <title>Efficient fiscal spending by supranational unions</title>
      <link>http://hdl.handle.net/10419/68146</link>
      <description>Title: Efficient fiscal spending by supranational unions
&lt;br/&gt;
&lt;br/&gt;Authors: Simon, Jenny; Valasek, Justin Mattias
&lt;br/&gt;
&lt;br/&gt;Abstract: We use a novel approach to address the question of whether a union of sovereign countries can efficiently raise and allocate a budget, even when members are purely self-interested and participation is voluntary. The main innovation of our model is to explore the link between budget contributions and allocation that arises when countries bargain over union outcomes. This link stems from the distribution of bargaining power being endogenously determined. Generically, it follows that unstructured bargaining gives an inefficient result. We find, however, that efficiency is achieved with fully homogenous countries, and when countries have similar incomes and the union budget is small. Moreover, some redistribution arises endogenously, even though nations are purely self-interested and not forced to participate in the union. A larger union budget, however, entails a tradeoff between equality and efficiency. We also analyze alternative institutions and find that majority rule can improve efficiency if nations who prefer projects with high public good spillovers are endogenously selected to the majority coalition. Exogenous tax rules, such as the linear tax rule in the EU, which is designed to increase efficiency on the contribution margin, can also improve overall efficiency despite decreasing the efficiency of the allocation of funds.</description>
      <pubDate>Sat, 29 Oct 2011 22:58:59 GMT</pubDate>
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    <item>
      <title>Institutionalizing eurozone exit: A modified NEWNEY approach</title>
      <link>http://hdl.handle.net/10419/68145</link>
      <description>Title: Institutionalizing eurozone exit: A modified NEWNEY approach
&lt;br/&gt;
&lt;br/&gt;Authors: Huck, Steffen; Valasek, Justin Mattias
&lt;br/&gt;
&lt;br/&gt;Abstract: In this note, we argue that the Eurozone needs an institutional exit mechanism to enhance Eurozone stability, and propose modifications to the Dobbs' NEWNEY mechanism, the only mechanism that satisfies the twin properties of eliminating incentives for intra-Eurozone capital flight and maintaining Eurozone price stability. Our modifications eliminate moral hazard, allow for a fair distribution of costs (between and within countries) and are also appropriate for the exit of a fiscally strong country.</description>
      <pubDate>Sat, 29 Oct 2011 22:58:59 GMT</pubDate>
    </item>
    <item>
      <title>Efficient fiscal spending by supranational unions</title>
      <link>http://hdl.handle.net/10419/68146</link>
      <description>Title: Efficient fiscal spending by supranational unions
&lt;br/&gt;
&lt;br/&gt;Authors: Simon, Jenny; Valasek, Justin Mattias
&lt;br/&gt;
&lt;br/&gt;Abstract: We use a novel approach to address the question of whether a union of sovereign countries can efficiently raise and allocate a budget, even when members are purely self-interested and participation is voluntary. The main innovation of our model is to explore the link between budget contributions and allocation that arises when countries bargain over union outcomes. This link stems from the distribution of bargaining power being endogenously determined. Generically, it follows that unstructured bargaining gives an inefficient result. We find, however, that efficiency is achieved with fully homogenous countries, and when countries have similar incomes and the union budget is small. Moreover, some redistribution arises endogenously, even though nations are purely self-interested and not forced to participate in the union. A larger union budget, however, entails a tradeoff between equality and efficiency. We also analyze alternative institutions and find that majority rule can improve efficiency if nations who prefer projects with high public good spillovers are endogenously selected to the majority coalition. Exogenous tax rules, such as the linear tax rule in the EU, which is designed to increase efficiency on the contribution margin, can also improve overall efficiency despite decreasing the efficiency of the allocation of funds.</description>
      <pubDate>Sat, 29 Oct 2011 22:58:59 GMT</pubDate>
    </item>
    <item>
      <title>Institutionalizing eurozone exit: A modified NEWNEY approach</title>
      <link>http://hdl.handle.net/10419/68145</link>
      <description>Title: Institutionalizing eurozone exit: A modified NEWNEY approach
&lt;br/&gt;
&lt;br/&gt;Authors: Huck, Steffen; Valasek, Justin Mattias
&lt;br/&gt;
&lt;br/&gt;Abstract: In this note, we argue that the Eurozone needs an institutional exit mechanism to enhance Eurozone stability, and propose modifications to the Dobbs' NEWNEY mechanism, the only mechanism that satisfies the twin properties of eliminating incentives for intra-Eurozone capital flight and maintaining Eurozone price stability. Our modifications eliminate moral hazard, allow for a fair distribution of costs (between and within countries) and are also appropriate for the exit of a fiscally strong country.</description>
      <pubDate>Sat, 29 Oct 2011 22:58:59 GMT</pubDate>
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