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American Economic Review Vol. 90 No. 5 2000

Economic Integration and Political Disintegration

Alberto Alesina1; Enrico Spolaore2; Romain Wacziarg3

1 Department of Economics, Harvard University, Cambridge, MA 02138, National Bureau of Economic Research, and Centre for Economic Policy Research. · 2 Department of Economics, Brown University, Box B, Providence, RI 02912. · 3 Graduate School of Business, Stanford University, 518 Memorial Way, Stanford CA 94305.

Abstract

In a world of trade restrictions, large countries enjoy economic benefits, because political boundaries determine the size of the market. Under free trade and global markets even relatively small cultural, linguistic or ethnic groups can benefit from forming small, homogeneous political jurisdictions. This paper provides a formal model of the relationship between openness and the equilibrium number and size of countries, and successfully tests two implications of the model. Firstly, the economic benefits of country size are mediated by the degree of openness to trade. Secondly, the history of nation-state creations and secessions is influenced by the trade regime.

DOI
10.1257/aer.90.5.1276
Volume
90
Issue
5
Pages
1276-1296
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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