NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

On the Number and Size of Nations

Alberto Alesina, Enrico Spolaore

NBER Working Paper No. 5050
Issued in March 1995
NBER Program(s):   ME

This paper studies the equilibrium determination of the number of political jurisdictions in different political regimes, democratic or not, and in different economic environments, with more or less economic integration. We focus on the trade off between the benefits of large jurisdictions in terms of economies of scale and the costs of heterogeneity of large and diverse populations. Our model implies that: i) democratization leads to secessions; ii) without an appropriate redistributive scheme (which we characterize) in equilibrium one observes an inefficiently large number of countries; iii) the equilibrium number of countries is increasing in the amount of economic integration. We also study the welfare effects of economic integration and free trade when the number of countries is endogenous.

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Document Object Identifier (DOI): 10.3386/w5050

Published: Quarterly Journal of Economics, Vol. 107, no. 4 (November 1997): 1027-1056.

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