65 Pages Posted: 26 Jul 2007
Date Written: January 2002
We demonstrate that territorial size is intimately linked to the structure of political authority within states. We take an evolutionary approach, arguing that there are certain stable, long-term equilibrium combinations of size and political institutions. Building on a general theory of public goods provision and rent-seeking, we predict that, ceteris paribus, democracies will tend to be smaller than autocracies, since governments in the latter have greater incentives to expand the territory under their control in order to maximize rents; looked at from the other direction, small states are more likely to have democratic institutions than large states, since governments in the latter suffer greater losses in rents from expanding the size of the ruling coalition. Federalism offers an alternative type of equilibrium. We predict that democracies are more likely to adopt federal institutions than are autocracies, since governments in the latter are less inclined to relinquish authority to produce public goods (and hence the capacity to generate rents) to others. In addition, by allowing different public goods to be provided at more optimal scales, federalism increases incentives for democratic governments to expand the size of the state. Overall, we expect that unitary (i.e. non-federal) democracies will tend to be smaller than both autocracies and federal democracies. We find strong support for the hypotheses in a series of cross-sectional empirical investigations.. Theory and evidence indicate that democracy, federalism, and size are closely related to one another.
Keywords: democracy, autocracy, federalism, territorial size, endogenous institutions, public goods
JEL Classification: H10, H11, H19, H42
Suggested Citation: Suggested Citation