Globalization and Political Geography

34 Pages Posted: 21 Aug 2003

See all articles by Federico Etro

Federico Etro

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Ministry of Economy, Italy

Date Written: July 2003

Abstract

I study a model of geopolitical organization endogenizing the size of nations, of their public spending and of their degree of openness. The optimal geography may not be a stable equilibrium and the Alesina-Spolaore bias toward too many nations tends to be confirmed. However, multiple equilibria can emerge with globalization backlash associated with large nations and high protectionism and equilibria with smaller countries and high openness which are also Pareto superior. A dynamic version of the model shows stable paths of decreasing size of nations, increasing globalization and (at least initially) increasing public spending. Such a process seems consistent with the historical experience, but it may converge toward a steady state with excessive globalization, too many countries and typically too much government spending.

JEL Classification: H1, H4, E6, F0

Suggested Citation

Etro, Federico, Globalization and Political Geography (July 2003). Available at SSRN: https://ssrn.com/abstract=429962 or http://dx.doi.org/10.2139/ssrn.429962

Federico Etro (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-613-1230 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ministry of Economy, Italy ( email )

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Rome, Rome 00187
Italy

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