Regional Economic Analysis of Power, Elections, and Secession by Moriki Hosoe

Author:Moriki Hosoe
Language: eng
Format: epub
Publisher: Springer Japan, Tokyo

(6.8)

Here, we can obtain the following result of comparative static analysis of region O’s welfare at the optimal level of public policy under secession:

(6.9)

Therefore, one finds that when the public policy externality increases, region O’s welfare at equilibrium under secession decreases.

6.4 Choice of Fiscal Policy

As described in this section, we analyze region O’s decision-making related to secession. Furthermore, we analyze what level of transfer region A will choose at the third stage of the game. From Eqs. (6.3) and (6.8), one finds that if the following condition is satisfied, then region O will not choose to be independent from region A:

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