ABSTRACT
We examine a trade-off between strategic delegation and the internalization of interregional externalities through bargaining in the context of political economy. We show that in the case of one-sided provision of a public good, if the public good produced by one region generates a sufficiently significant spillover to another region, then interregional negotiation increases the total surplus of the entire economy.
Acknowledgements
This is a substantially revised version of Shinohara (Citation2016). I am grateful to an anonymous referee. I also thank Wataru Kobayashi, Tomomi Miyazaki, and Kazuki Hiraga for helpful comments. I gratefully acknowledge financial support from JSPS KAKENHI Grand-in-Aid for Scientific Research JP15H03349 and JP15K03361.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1 The proofs of all results are available upon request or see the corresponding parts in Shinohara (Citation2016).
2 Note that since , the relative relationship between the total surplus of the economy with negotiation and that without negotiation is equivalent to the relationship between and .