International Unions


Alesina, Alberto, Ignazio Angeloni, and Federico Etro. 2005. “International Unions.” American Economic Review 95: 602-15.
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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 non-uniform policies that reduce these inefficiencies, focusing particularly on arrangements that are relevant for the ongoing debate on the institutional structure of the European Union.

Last updated on 12/04/2012