Economic Integration and Political Disintegration

Alberto Alesina (), Enrico Spolaore and Romain Wacziarg ()

No 6163, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Trade liberalization and political separatism go hand in hand. In a world of trade restrictions, large countries enjoy economic benefits because political boundaries determine the size of the market. In a world of free trade and global markets even relatively small cultural, linguistic or ethnic groups can benefit from forming small and homogeneous political jurisdictions that trade peacefully and are economically integrated with others. 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. The first one is that the economic benefits of country size depend on and are mediated by the degree of openness to trade. The second is that the history of Nation-State creations and secessions is influenced by the trade regime.

JEL-codes: F15 F43 (search for similar items in EconPapers)
Date: 1997-09
Note: EFG IFM ITI
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