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Harmonization and Side Payments in Political Cooperation
The American Economic Review
I study two regions that are negotiating an agreement to internalize externalities. Local preferences are local information, but reluctance is, in equilibrium, signaled by delay. Conditions are derived for when it is efficient to restrict the attention to policies that are uniform across regions -with and without side payments -and when it is efficient to prohibit side payments in the negotiations. While policy differentiation and side payments allow the policy to reflect local conditions, theydoi:10.1257/aer.97.3.871 fatcat:jxgzyt7aljbevc5iye2scllsxy