Borders and Growth
64 Pages Posted: 5 Oct 2005
There are 3 versions of this paper
Borders and Growth
Date Written: August 2005
Abstract
This paper presents a framework to understand and measure the effects of political borders on economic growth and per capita income levels. In our model, political integration between two countries results in a positive country size effect and a negative effect through reduced openness vis-a-vis the rest of the world. Additional effects stem from possible changes in other growth determinants, besides country size and openness, when countries are merged. We estimate the growth effects that would have resulted from the hypothetical removal of national borders between pairs of adjacent countries under various scenarios. We identify country pairs where political integration would have been mutually beneficial. We find that full political integration would have slightly reduced an average country's growth rate, while most countries would benefit from a more limited form of merger, involving higher economic integration with their neighbors.
Keywords: Economic integration, economic growth, political unions
JEL Classification: F1, O5
Suggested Citation: Suggested Citation
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