Spolaore, Enrico --- "The economics of political borders" [2016] ELECD 1022; in Kontorovich, Eugene; Parisi, Francesco (eds), "Economic Analysis of International Law" (Edward Elgar Publishing, 2016) 11

Book Title: Economic Analysis of International Law

Editor(s): Kontorovich, Eugene; Parisi, Francesco

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857930156

Section: Chapter 1

Section Title: The economics of political borders

Author(s): Spolaore, Enrico

Number of pages: 33

Abstract/Description:

Why do countries break up? What are the costs and benefits of secessions? When are secessions efficient or inefficient from an economic perspective? How is political disintegration related to globalization and democratization? Do decentralization and federalism affect the incentives to secede? How is the size of nations impacted by conflict and wars? These complex questions, traditionally addressed by historians and political scientists, are now also at the center of a growing economics literature on the formation and breakup of sovereign states and political unions. This paper presents concepts and results from this line of economic analysis. First, we discuss the key trade-off between economies of scale in the provision of public good and political costs from heterogeneity of preferences. Second, we present four economic perspectives on the formation of borders: efficient borders, borders as democratic outcomes, borders in a world of rent-seeking Leviathans, and borders as outcomes of conflict and wars. Finally, we provide an analytical illustration of the basic ideas within a simple framework.