TOPICS IN POLITICAL ECONOMY
CEU, Economics Department



Lecturer: Prof. Shlomo Weber
Course: 1credit
 
 

In the last few years the world map and national borders have been redrawn quite dramatically. This process of change is
probably far from over as a large number of secessionist movements mushroom across the globe. In this course we will
attempt to analyze economical and political reasons that prompt heterogeneous regions or provinces to be apart or together.
We will examine the effect of heterogeneity and polarization of citizens’ characteristics or preferences on country redistribution
policies. We will also evaluate the impact that a threat of secession by some regions may have on the income distribution and
transfers from the central government to the regions. First, we will deal with a theoretical part and then will turn our attention to
an empirical analysis of various countries.

Introduction

Alesina, A. and E. Spolaore (1997), "On the Number and Size of Nations", Quarterly Journal of Economics 113,
1027-1056.

Alesina, A. and E. Spolaore (2003),  The MIT Press.

Bolton, P., Roland, G. and E. Spolaore (1996), "Economic Theories of the Breakup and Integration of Nations",
European Economic Review 40, 697-706.

Friedman, D. (1977), "A Theory of the Size and Shape of Nations", Journal of Political Economy 85, 59-77.

Wittman, D. (1991), "Nations and States: Mergers and Acquisitions, Dissolution and Divorce", American Economic
Review, Papers and Proceedings 81, 126-129.

Young, R. (1998), "Secession Games", in Palgrave Dictionary of Economics and the Law, P. Newman, ed.,
Stockton Press, New York.

Le Breton, M. and S.Weber  (2004),  "Secession-Proof Allocations and Stable Group Structures in Model of Horizontal
Product Differentiation" (with), in “Group Formation in Economics: Networks, Clubs and Coalitions”,  Demange, G. and
M.Wooders, eds., Cambridge University Press, 2004, 266-285.

Large versus Small: Efficiency and Stability Analysis

Alesina, A. and E. Spolaore (2005), "War, Peace and the Size of the Countries", Journal of Public Economics 89,
1333-1354.

Alesina, A., Spolaore, E. and R. Wacziarg (2000), "Economic Integration and Political Disintegration", American
Economic Review  90 1276-1296.

Barro, R.J. (1998), Getting it Right, The MI Press, Cambridge.

Casella, A. (1992), "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity",
American Economic Review, Papers and Proceedings 82, 115-121.

Cremer, H., De Kerchove, A.M. and J.J. Thisse (1985), "An Economic Theory of Public Facilities in Space", Mathematical
Social Sciences 9, 249-262.

Easterly, W. and S. Rebello (1993), "Fiscal Policy and Economic Growth: An Empirical Investigation", Journal of
Monetary Economics 32, 417-458.

Haimanko, O.,  Le Breton, M,  and S.Weber  (2004) , "Voluntary Formation of Communities for Provision of Public
Projects", Journal of Economic Theory,  115, 34.

Constitutional and Contractual Analysis of Federations

Bordignon, M. and S. Brusco (2001), "Optimal Secession Rules",  European Economic Review 45,  1811-1834.

Jehiel, P. and S. Scotchmer (1997), "Free Mobility and the Optimal Number of Jurisdictions",  Annales d'Economie
et de Statistiques 45, 219-231.

Jehiel, P. and S. Scotchmer (2001), "Constitutional Rules of Exclusion in Jurisdiction Formation", Review of Economic
Studies, 68 393-411.

Persson, T. and G. Tabellini (1996a), "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard", Econometrica 64,
623-646.

Persson, T. and G. Tabellini (1996b), "Federal Fiscal Constitutions: Risk Sharing and Redistribution", Journal of Political
Economy 104, 979-1009.

Income Distribution and a Threat of Secession

Bolton, P. and G. Roland (1996), "Distributional Conflicts, Factor Mobility, and Political Integration", American Economic
Review, Papers and Proceedings 86, 99-104.

Bolton, P. and G. Roland (1997), "The Break-up of Nations: A Political Economy Analysis", Quarterly Journal of Economics
113, 1057-1090.

Buchanan, J.M. and R.I. Faith (1987), "Secessions and the Limits of Taxation: Towards a Theory of Internal Exit", American
Economic Review 77, 1023-31.

Fidrmuc, J. (1999), "Stochastic Shocks and Incentives for (Dis)Integration", CEPR Working Paper #2104.

Olofsgard, A. (1999), "Secessions and Nationalism in a Model with Size Externalities and Imperfect Mobility", Mimeo,
Institute for International Economic Studies, Stockholm.

Persson, T. and G. Tabellini (1999), "Political Economics and Public Finance", Mimeo, Bocconi University.

Fiscal Decentralization, Threat of Secession and Redistributive Policies

Ahmad, E. and J. Craig (1997), "Intergovernmental Transfers" in Fiscal Federalism in Theory and Practice, International
Monetary Fund, Washington, D.C.

Haimanko, O.,  Le Breton, M,  and S.Weber  (2005) ,"Transfers in a Polarized Country: Bridging the Gap Between
Efficiency and Stability"   Journal of Public Economics,  89, 1277-1303.

Le Breton, M. and S. Weber (2003), "The Art of Making Everybody Happy: How to Prevent a Secession", IMF Staff Papers,
50, 1303-1335.

Spahn, P.B. and W. Fottinger (1997), "Germany" in Fiscal Federalism in Theory and Practice, International Monetary Fund,
Washington, D.C.

Theoretical Appendix

Caplin, A. and B. Nalebuff (1991), "Aggregation and Social Choice: A Mean Voter Theorem", Econometrica 59, 1-24.

Greenberg, J. and S. Weber (1986), "Strong Tiebout Equilibrium Under Restricted Preferences Domain", Journal of
Economic Theory 38, 101-117.

Guesnerie, R. and C. Oddou (1981), "Second Best Taxation as a Game", Journal of Economic Theory 25, 67-91.

Weber, S. (1992), "On Hierarchical Spatial Competition", Review of Economic Studies 59, 407-425.