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Formation of Nations in a Welfare‐State Minded World
Author(s) -
Dagan Nir,
Volij Oscar
Publication year - 2000
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1097-3923.00035
Subject(s) - economics , welfare , inequality , distribution (mathematics) , welfare state , world economy , income distribution , preference , economic inequality , state (computer science) , development economics , microeconomics , market economy , politics , political science , law , mathematical analysis , mathematics , algorithm , computer science
We model the endogenous formation of nations in a world economy where nations apply redistributive policies. We show that people's preference for stronger redistributive policies may lead to greater inequality in the world's distribution of income as a result of rich individuals tending to form their own nations. By the same token, stable economic integration occurs only when redistributive policies are not too strong.