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Globalization and Political Structure

Author

Listed:
  • Gino Gancia
  • Giacomo A M Ponzetto
  • Jaume Ventura

Abstract

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.

Suggested Citation

  • Gino Gancia & Giacomo A M Ponzetto & Jaume Ventura, 2022. "Globalization and Political Structure," Journal of the European Economic Association, European Economic Association, vol. 20(3), pages 1276-1310.
    • Handle: RePEc:oup:jeurec:v:20:y:2022:i:3:p:1276-1310.
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    Cited by:

    1. Forslid, Rikard & Nyberg, Sten, 2017. "Brexit - balancing trade and mobility?," CEPR Discussion Papers 12370, C.E.P.R. Discussion Papers.
    2. Gancia, Gino & Ponzetto, Giacomo A.M. & Ventura, Jaume, 2020. "A theory of economic unions," Journal of Monetary Economics, Elsevier, vol. 109(C), pages 107-127.
    3. Aleberto Alesina & Guido Tabellini & Francesco Trebbi, 2017. "Is Europe an Optimal Political Area?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(1 (Spring), pages 169-234.
    4. Bonfatti, Roberto & Cosar, Kerem, 2022. "Rise and Fall of Empires in the Industrial Era: A Story of Shifting Comparative Advantages," CEPR Discussion Papers 17482, C.E.P.R. Discussion Papers.
    5. Vanschoonbeek, Jakob, 2020. "Divided We Stad: a Fiscal Bargaining Model for Divided Countries," MPRA Paper 101863, University Library of Munich, Germany.
    6. Enrico Spolaore, 2022. "The Economic Approach to Political Borders," CESifo Working Paper Series 10165, CESifo.
    7. Bonfatti, Roberto, 2017. "The sustainability of empire in a global perspective: The role of international trade patterns," Journal of International Economics, Elsevier, vol. 108(C), pages 137-156.
    8. Arnorsson, Agust & Zoega, Gylfi, 2018. "On the causes of Brexit," European Journal of Political Economy, Elsevier, vol. 55(C), pages 301-323.
    9. Klaus Desmet & Ignacio Ortuño-Ortín & Ömer Özak, 2022. "Is Secessionism Mostly About Income or Identity? A Global Analysis of 3,003 Subnational Regions," NBER Working Papers 30428, National Bureau of Economic Research, Inc.
    10. Kitamura, Shuhei & Lagerlöf, Nils-Petter, 2021. "Cities, Conflict, and Corridors," OSF Preprints cfrzs, Center for Open Science.
    11. Joan Esteban & Sabine Flamand & Massimo Morelli & Dominic Rohner, 2018. "A Dynamic Theory of Secession," HiCN Working Papers 276, Households in Conflict Network.
    12. Xie, Chengyuan & Jin, Xiaotong, 2023. "The role of digitalization, sustainable environment, natural resources and political globalization towards economic well-being in China, Japan and South Korea," Resources Policy, Elsevier, vol. 83(C).
    13. Joan Esteban & Sabine Flamand & Massimo Morelli & Dominic Rohner, 2017. "Stay, Split or Strike: Theory and Evidence on Secessionist vs Centrist Conflict," Working Papers 609, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    14. Kym Anderson, 2016. "Agricultural Trade, Policy Reforms, and Global Food Security," Palgrave Studies in Agricultural Economics and Food Policy, Palgrave Macmillan, number 978-1-137-46925-0, October.
    15. Joan-Maria Esteban & Sabine Flamand & Massimo Morelli & Dominic Rohner, 2018. "The Survival and Demise of the State: A Dynamic Theory of Secession," Working Papers 1028, Barcelona School of Economics.
    16. Suesse, Marvin, 2019. "Adjusting the size of nations: Empirical determinants of separatism and the Soviet breakup," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 50-64.
    17. Kobielarz, Michał L., 2024. "A theory of international unions with exits," Journal of Economic Theory, Elsevier, vol. 215(C).
    18. Rikard Forslid & Sten Nyberg, 2021. "Brexit: How to Reach an Amicable Divorce," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 966-994, July.

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    More about this item

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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