Should a subset of member states of a federation be allowed to form a sub-union on some policy issue? When centralization is not politically feasible, allowing an enhanced cooperation agreement among a subset of countries permits the latter to gain benefits which would otherwise be lost....

The European economic integration leads to increasing mobility of factors, thereby threatening the stability of social transfer programs. This article investigates the possibility to achieve by means of voluntary matching grants both the optimal allocation of factors and the optimal level of...