Borders, Conflicts and Bargaining in Federations and Communities of Governments

Economic policy in the modern world can be treated as an outcome of interaction of multiple territorial centers of public authority: nation-states, subnational and supranational jurisdictions. In the last decades economics has increased its attention to the factors which influence the distribution of power among jurisdictions. The paper surveys two main research areas in this literature: economics of conflicts and theory of endogenous decentralization. It discusses the basic models of both approaches and their modifications applied in the literature as well as factors of conflict formation and bargaining over devolution.