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Globalization and Political Structure

Gino Gancia (), Giacomo Ponzetto () and Jaume Ventura

No 878, Working Papers from Barcelona Graduate School of Economics

Abstract: This paper develops a theoretical framework to study the interaction between globalization and political structure. We show that political structure adapts to expanding trade opportunities in a non-monotonic way. Borders hamper trade. In its early stages, the political response to globalization consists of removing borders by increasing country size. In its later stages, however, the political response to globalization is to remove borders by creating international unions, and this leads to a reduction in country size. Moreover, negotiation replaces war as a tool to ensure market access. These predictions are consistent with historical evidence on trade, territorial expansion and war.

Keywords: globalization; political structure; size of countries; international unions (search for similar items in EconPapers)
JEL-codes: D71 F15 F55 H77 O57 (search for similar items in EconPapers)
Date: 2016-02
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Working Paper: Globalization and Political Structure (2014) Downloads
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