Political economy of emirate to emirate transfers

The United Arab Emirates is made up of seven emirates. Abu Dhabi is the largest in area and possesses more than 90 percent of the oil and gas. Abu Dhabi transfers a considerable amount of its income to the governments and the ruling families of the other emirates most of which have little or no oil and gas. The ruling families use some of their transfers received for public purposes.

I suspect, too, that Abu Dhabi is the source of investments in major "private" projects in the other emirates. But this is not transparent. Nor is it clear whether these investments are really subsidies for projects that are unlikely to yield a good economic return.

The recent transfer of power in the UAE may have been facilitated by changes in the size of transfers from Abu Dhabi -- both emirate to emirate transfers, and "private" investment.

Is Abu Dhabi being subjected to hold-up by the other emirates?; Abu Dhabi seems to be willing to pay to keep the UAE federation together.

What would happen if Abu Dhabi made the transfers more transparent to the citizens of the UAE, and more of the Abu Dhabi transfers went directly to the citizens, bypassing the rulers of the individual emirates? Could it still keep the federation together and reduce transfers?

Can lessons learned from the Canadian, U.S., and EU experiences with federalism be applied?

Concepts: federalism, hold-up problem, opportunism.

Quote of the day: Oliver Williamson - ‘Opportunism is self interest seeking with guile often involving subtle forms of deceit, especially calculated efforts to mislead, distort, disguise, obfuscate, or otherwise confuse. This vastly complicates the problems of economic organisation. Plainly if it were not for opportunism all behaviour could be rule governed'. The Economic Institutions of Capitalism. (My emphasis.)