Ben Li () and
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Penglong Zhang: Boston College
No 909, Boston College Working Papers in Economics from Boston College Department of Economics
Since the Age of Discovery, the world has grown integrated economically while remaining disintegrated politically as a collection of nation-states. The nation-state system is robust because borders, as state dividers, interact with economic integration to absorb shocks. We build a tractable general equilibrium model of international trade and national borders in the world. Over a longer time horizon, declining trade costs alter trade volumes across states but also incentivize states to redraw borders, causing states to form, change, and dissolve. Our model offers significant implications for the global economy and politics, including trade patterns, political geography, its interplay with natural geography, state-size distribution, and the risks of militarized disputes. These implications are supported by modern and historical data.
Keywords: nation-state; endogenous borders; militarized disputes; trade costs (search for similar items in EconPapers)
JEL-codes: N40 F50 (search for similar items in EconPapers)
Date: 2016-03-15, Revised 2017-02-06
New Economics Papers: this item is included in nep-int
Note: Previously circulated as "Trade and Geopolitics"
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:909
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