The Economics of Political Borders
35 Pages Posted: 30 Jun 2012
Date Written: June 28, 2012
This paper presents concepts from economic analysis that shed light on the formation and breakup of sovereign states. First, we discuss the key trade-off between economies of scale in the provision of public goods 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.
Keywords: economies of scale, heterogeneity costs, conflict, size of nations
JEL Classification: N410
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