The French and Dutch refusal to ratify the European Constitution in 2005 and the collapse of many East German businesses post-reunification; are just some examples of the hurdles integrating nations face. Integration of nations affects many economic factors such as public good allocation, trade, production, labour, consumption and even macro-economic policy instruments. Therefore, it is important to understand what motivates integration. Few scholars have broached the subject of the integration of nations (see Goyal and Staal (2004)), where size asymmetry and historical dependence are considered. Starting with Alesina and Spolaore (2003)'s Size of Nations symmetric framework, we attempt to do this with a two nation (asymmetric in size) location model. The key findings are that size differentials and the constitutional design (the identity of the decision maker) matters. In this thesis, we consider the social planner (government) and voters. The social planner maximizes social welfare for his own nation. Voting outcomes become non-trivial as it depends on the number of alternatives and the voting system. We categorize integration into two main forms. Full Integration is when the two nations fully integrate to form a new one, only one capital remains. Federated Integration is where the nations integrate but retain some form of sovereignty; this is represented by the retention of both capitals. Size difference matters when two nations chose to integrate. As the size difference between the two nations increase it becomes harder for integration to occur; nations would integrate if there is no size difference. The identity of the decision maker will affect the threshold on size.
| Identifer | oai:union.ndltd.org:ADTP/243000 |
| Date | January 2007 |
| Creators | Teo, Ernie G. S., Economics, Australian School of Business, UNSW |
| Publisher | Awarded by:University of New South Wales. School of Economics |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | Copyright Ernie G. S. Teo, http://unsworks.unsw.edu.au/copyright |
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