Working Papers Home


2014 Working Papers
2013 Working Papers
2012 Working Papers
2011 Working Papers
2010 Working Papers
2009 Working Papers
2008 Working Papers
2007 Working Papers
2006 Working Papers
2005 Working Papers
2004 Working Papers
2003 Working Papers
2002 Working Papers
2001 Working Papers
2000 Working Papers


Search All Papers


JEL Classification


Past Working Papers (Prior to 2000)


Office of Research
Home Page



Information on
Submitting a Paper



 
 
"Why join a common market? The political economy of international factor mobility in a multi-country setting"

Giovanni Facchini

 

First Author :

Giovanni Facchini
Economics
University of Illinois at Urbana-Champaign
1206 S. Sixth Street, M/C 706
Champaign, IL 61820
USA

facchini@uiuc.edu

http://www.business.uiuc.edu/faculty/facchini.html

 
 
Abstract :
 
This paper develops a theory of the endogenous formation of a common market in a three–country, n factor political economy model. Ex ante policies in each of the prospective members are the result of direct democracy, and equilibrium outcomes may include both import restrictions as well as subsidies. The decision to join a common market is modelled as a simultaneous move game between the two prospective members. Several interesting results emerge. First, ex ante differences in subsidies do not affect the attitude of the median voter. Second, for a common market to emerge, ex post factor flows between prospective members have to be balanced. Third, the likelihood that a common market emerges increases with the number of factors enjoying ex post enhanced protection. This last result highlights the potential tension between social desirability and political feasibility of the common market.
 
 
JEL Classification : F1 , F2 , P16
 
 
Footnotes & Acknowledgements :
 
I would like to thank Todd Elder, Hadi Esfahani, Horst Ra®, Gerald Willmann and Nicholas Yannelis for very useful comments, as well as seminar audiences at Kiel, Tilburg and Paris.
 
 
Manuscript Received : 2002
Manuscript Published : 2002
 
 
This abstract has been viewed 2666 times.
Click here to view the full text of this paper.