Economic Integration, International Conflict and Political Unions

This article studies the interactions among economic integration, international conflict, and the formation and breakup of political unions. Economic integration reduces the importance of political size, while international conflict increases it. When international conflict reduces economic integration between politically separate units, multiple equilibria are possible. In one equilibrium, political units are small and more open and engage less in conflict, therefore making political size less important. In another equilibrium, the world is formed by larger units, with more conflict and less economic integration

Political Geography and Income Inequalities

This paper studies the effect of the introduction of income inequalities in a model of geopolitical organization. We assume the existence of two groups of agents with different incomes. We focus on the policy effects of changes in income differential between the groups and changes in the fraction of the population belonging to the two groups. In the optimal solution, if size is endogenous and public good provision exogenous size increases as income inequality increases; if both size and public good provision are endogenously determined size is neutral to changes in income inequalities and public good provision decreases as inequality increases. There are cases where a stable solution does not exist and the possibility of non existence increases together with inequality, if both size and public good provision are endogenously determined.Country Size, Public Good, Income Inequality, Tax Distortion

The number and size of nations revisited: Endogenous border formation with non-uniform population distributions

The endogenous border formation model of Alesina and Spolaore (1997) has received a lot of attention in the economics community. One of its central messages is that in a democratic world in equilibrium there is an ineciently large number of nation states. However, this result is obtained under very specic assumptions like a uniform population distribution and no population mobility. In this paper, I generalize the model of Alesina and Spolaore allowing for population distributions other than the uniform distribution. Since this generalization is accompanied by the loss of tractability in closed form, I calculate the equilibria by means of numerical computation. It turns out that the above-mentioned central result is highly sensitive to the choice of population distribution and that the model shows four different regimes depending on the chosen distribution. Furthermore, the behaviour implied by the Alesina and Spolaore model with uniform population distribution is the exception, not the rule.Size of Nations; Endogenous Border Formation; Computational Economics

Centralized and decentralized provision of public goods

We model the trade-off between centralized and decentralized decision making over the provision of local public goods. Centralized decisions are made in a legislature of locally elected representatives, and this creates a conflict of interest between citizens in different jurisdictions. The legislature can be self-interested or benevolent and this can result in either efficient, excessive or misallocative provision of public goods. Decisions are inuenced by spillover effects and differences in jurisdictionalsize. Furthermore, we look at the incentives for centralization

National Borders, Conflict and Peace

This paper reviews the economics approach to conflict and national borders. The paper (a) provides a summary of ideas and concepts from the economics literature on the size of nations; (b) illustrates them within a simple analytical framework where populations fight over borders and resources, and may form non-aggression pacts, military alliances, and political unions; and (c) discusses extensions and directions for further research.Wars, Alliances, Conflict Technology, Defense, Economies of Scale, Heterogeneity Costs, Secessions, Size of Nations.

National Borders, Conflict and Peace

This paper reviews the economics approach to conflict and national borders. The paper (a) provides a summary of ideas and concepts from the economics literature on the size of nations; (b) illustrates them within a simple analytical framework where populations fight over borders and resources, and may form non-aggression pacts, military alliances, and political unions; and (c) discusses extensions and directions for further research.wars, alliances, conflict technology, defense, economies of scale, heterogeneity costs, secessions, size of nations

Bounds Estimation for Trade Openness and Government Expenditure Nexus of ASEAN-4 Countries

Southeast Asia countries are encountering several challenges as they are moving towards the globalization and trade liberalization era. Due to that, government intervention is essential in ensuring that the economy is resilience against the severe implications of trade openness. Therefore, this study aims to examine the relationship between trade openness and government expenditure of ASEAN-4 countries using the Autoregressive Distributed Lag [ARDL] bounds testing approach that covers a sample period of annually data from 1974-2006. Empirical results indicate that there is an existence of a significant positive long-run linkage between trade openness and government expenditure of all the ASEAN-4 countries under study. This means that government intervention in an open economy is crucial as to cushion the risks associated with trade liberalization.ARDL, ASEAN-4, openness, government expenditure

Unveiling vertical state downscaling: identity and/or the economy?

State rescaling may take a variety of shapes although scant research has been carried out into the mechanisms and economic incentives that underpin rescaling processes. Recent literature in economics, economic sociology and political economy has identified at least two broad rescaling mechanisms, namely the development of regional identity - operating at the cultural level and proxing preference heterogeneity-, and the heterogeneity in levels of economic development, which influence the extent of regional redistribution. This paper empirically examines the mechanisms of vertical state rescaling by drawing upon empirical evidence from Catalonia and the Basque Country, to explore the evolution of sub-state identity and the rise of inter-territorial fiscal grievances - weakening intraregional economic solidarity. Findings corroborate the idea that the combination of widening sub-national identity raises the costs of managing heterogeneous spatial identities and strengthens support for vertical state downscaling. Similarly, ending regional fiscal solidarity it is found to increase the average income of Catalonia by 37% and even 17% in the Basque Country. However, the effect of regional identity exceeds that of regional redistribution in explaining state rescaling support in the magnitude of one to seven. These findings speak to the debate on the formation of Europe, in that they reveal limits to regional redistribution and highlight the importance of a common spatial identity

Centralized and decentralized provision of public goods

We model the trade-off between centralized and decentralized decision making over the provision of local public goods. Centralized decisions are made in a legislature of locally elected representatives, and this creates a conflict of interest between citizens in different jurisdictions. The legislature can be self-interested or benevolent and this can result in either efficient, excessive or misallocative provision of public goods. Decisions are inuenced by spillover effects and differences in jurisdictionalsize. Furthermore, we look at the incentives for centralization.decentralization; local public goods

Secessionism and Minority Protection in an Uncertain World

With the changing economic circumstances confronting their countries, regionally concentrated minorities have been facing a strategic problem, important aspects of which can be stylized as a situation in which a minority leader is uncertain about the costs of secession for her community. This paper shows that this uncertainty is a central cause of secession, using a model which incorporates both policies to appease secessionist aspirations and informational asymmetries. In a situation of asymmetric information, in which the policy-maker is better informed about the consequences of separation than the minority leader, signaling incentives make secession the unique equilibrium outcome, whether mutually advantageous compromises exist or not. We also show that the ruling majority may seek to maintain political unity by pre-committing to minority protection rules which prevent bluffing by the informed policy-maker. Additionally, the model generates comparative statics results on the question of which states are most likely to adopt constitutional rules protecting the minorities living within their borders.Constitutional commitment, secession, signaling, regional redistribution