Political bargaining in a federation: Buchanan meets Coase

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21 Scopus citations


In recent decades, the issues of federalism and political integration have gained prominence in public debate as well as in the academic realm. A frequently made point is that allowing free secession may protect the minority's interests, thus providing it with an incentive to enter the federation. This paper explicitly considers the political process in the federation arguing that the option to secede may distort the political choices made by the individual regions to improve their bargaining positions. As a result, the allocation of resources in the federation could well end up being inefficient and unattractive for the minority region. In contrast, limiting the secession possibilities by requiring the consent of a majority of voters through a regional referendum, rather than leaving it to the discretion of the legislature, restores efficiency.

Original languageEnglish
Pages (from-to)983-999
Number of pages17
JournalEuropean Economic Review
Issue number5
StatePublished - 1 Oct 2004


  • Federation
  • Secession

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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