Le Breton, Michel.
The Art of Making Everybody Happy How to Prevent a Secession / Michel Le Breton. [electronic resource] : Michel Le Breton. - Washington, D.C. : International Monetary Fund, 2001. - 1 online resource (36 p.) - IMF Working Papers; Working Paper ; No. 01/176 . - IMF Working Papers; Working Paper ; No. 01/176 .
In this paper we consider a model of the country with heterogeneous population and examine compensation schemes that may prevent a threat of secession by dissatisfied regions. We show that horizontal imbalances are combatable with secession-proof compensation schemes that entail a degree of partial equalization: the disadvantageous regions should be subsidized but the burden on advantageous regions should not be too excessive. In the case of uniform distribution, we establish the 50-percent compensation rule for disadvantageous regions. Thus, we argue for a limited gap reduction between advantageous and disadvantageous regions and show that neither laissez faire nor Rawlsian allocation is secession-proof.
1451858817 : 15.00 USD
1018-5941
10.5089/9781451858815.001 doi
Budget Constraint
Compensation
Fiscal Capacity
Fiscal Federalism
Partial Equalization
Subsidies
Germany
The Art of Making Everybody Happy How to Prevent a Secession / Michel Le Breton. [electronic resource] : Michel Le Breton. - Washington, D.C. : International Monetary Fund, 2001. - 1 online resource (36 p.) - IMF Working Papers; Working Paper ; No. 01/176 . - IMF Working Papers; Working Paper ; No. 01/176 .
In this paper we consider a model of the country with heterogeneous population and examine compensation schemes that may prevent a threat of secession by dissatisfied regions. We show that horizontal imbalances are combatable with secession-proof compensation schemes that entail a degree of partial equalization: the disadvantageous regions should be subsidized but the burden on advantageous regions should not be too excessive. In the case of uniform distribution, we establish the 50-percent compensation rule for disadvantageous regions. Thus, we argue for a limited gap reduction between advantageous and disadvantageous regions and show that neither laissez faire nor Rawlsian allocation is secession-proof.
1451858817 : 15.00 USD
1018-5941
10.5089/9781451858815.001 doi
Budget Constraint
Compensation
Fiscal Capacity
Fiscal Federalism
Partial Equalization
Subsidies
Germany