Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77654
Authors: 
Simon, Jenny
Valasek, Justin Mattias
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4321
Abstract: 
We study fiscal spending by supranational unions, where participation is voluntary and countries bargain over contributions to and the allocation of a central budget. We explore the link between the allocation and nations' contributions that occurs since bargaining power is endogenous, and generically causes inefficiency. Interestingly, redistribution arises endogenously, despite nations being purely self-interested. However, there exists a trade-off between increasing equality and decreasing efficiency, which becomes more severe as the centralized budget increases. We also analyze partial ex-ante commitment through alternative decision-making institutions: Both majority rule and exogenous tax rules can improve efficiency.
Subjects: 
supranational unions
efficiency
public goods
redistribution
federalism
legislative bargaining
JEL: 
H77
H87
D71
Document Type: 
Working Paper

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