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Economic Integration and Political Disintegration

Alberto Alesina, Enrico Spolaore and Romain Wacziarg
The American Economic Review
Vol. 90, No. 5 (Dec., 2000), pp. 1276-1296
Stable URL: http://www.jstor.org/stable/2677851
Page Count: 21
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Economic Integration and Political Disintegration
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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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