Globalization and Political Structure
Volume
20
Pagination
1276 - 1310
Publisher
DOI
10.1093/jeea/jvac019
Journal
Journal of the European Economic Association
Issue
ISSN
1542-4766
Metadata
Show full item recordAbstract
This paper develops a theoretical framework to study the interaction between globalization and political structure. We show that political structure adapts in a non-monotonic way to declining transport costs. Borders hamper trade. At an earlier stage, the political response to expanding trade opportunities consists of removing borders by increasing country size. At a later stage, instead, it consists of removing the cost of borders by creating international unions. This leads to a reduction in country size. Moreover, diplomacy replaces conquest as a tool to ensure market access. These predictions are consistent with historical evidence on trade, territorial changes, and membership of international unions.
Authors
Gancia, G; Ponzetto, GAM; Ventura, JCollections
- Economics and Finance [369]