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http://bura.brunel.ac.uk/handle/2438/11697
Title: | Political economy of fiscal unions |
Authors: | Fidrmuc, J Munich, C |
Keywords: | Fiscal federalism;Risk sharing;Disintegration;Median voter |
Issue Date: | 2015 |
Publisher: | Elsevier |
Citation: | European Journal of Political Economy, 40: pp. 147 - 157 (2015) |
Abstract: | Fiscal unions often use fiscal transfers to counter asymmetric shocks, but such transfers may be politically controversial. I present a model of a two-region fiscal union with region-specific shocks where the threat of secession imposes a limit on fiscal redistribution between regions. I show that both correlation of shocks across regions and their persistence over time are important for political support for integration. The gains from inter-regional risk sharing are potentially large when shocks are negatively correlated and temporary. In contrast, unions with negatively correlated permanent shocks are likely to be fragile. |
URI: | http://www.sciencedirect.com/science/article/pii/S0176268015000828 http://bura.brunel.ac.uk/handle/2438/11697 |
DOI: | http://dx.doi.org/10.1016/j.ejpoleco.2015.09.002 |
ISSN: | 0176-2680 |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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