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American Economic Review: Vol. 90 No. 5 (December 2000)

AER Volume. 90, Issue 5 | Previous ArticleNext Article

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Economic Integration and Political Disintegration

Article Citation

Alesina, Alberto, Enrico Spolaore, and Romain Wacziarg. 2000. "Economic Integration and Political Disintegration." American Economic Review, 90(5): 1276-1296.

DOI: 10.1257/aer.90.5.1276

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.

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Authors

Alesina, Alberto (Harvard U, NBER, and CEPR)
Spolaore, Enrico (Brown U)
Wacziarg, Romain (Stanford U)

JEL Classifications

F41: Open Economy Macroeconomics
F02: International Economic Order
N40: Economic History: Government, War, Law, and Regulation: General, International, or Comparative
F15: Economic Integration