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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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    File URL: http://hdl.handle.net/10.1093/jeea/jvac019
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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. Arnorsson, Agust & Zoega, Gylfi, 2018. "On the causes of Brexit," European Journal of Political Economy, Elsevier, vol. 55(C), pages 301-323.
    3. 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.
    4. 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.
    5. 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, June.
    6. Rohner, Dominic & Esteban, Joan & Flamand, Sabine & Morelli, Massimo, 2018. "A Dynamic Theory of Secession," CEPR Discussion Papers 12398, C.E.P.R. Discussion Papers.
    7. Mohamed Yufenyuy & Saltuk Pirgalıoğlu & Orhan Yenigün, 2025. "The asymmetric effect of biomass energy use on environmental quality: empirical evidence from the Congo Basin," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(5), pages 10241-10274, May.
    8. Enrico Spolaore, 2022. "The Economic Approach to Political Borders," NBER Working Papers 30800, National Bureau of Economic Research, Inc.
    9. Shuhei Kitamura & Nils-Petter Lagerlöf, 2025. "Battles and Capitals," ISER Discussion Paper 1290, Institute of Social and Economic Research, The University of Osaka.
    10. Sabine Flamand & Massimo Morelli & Dominic Rohner & Joan-Maria Esteban, 2018. "The Survival and Demise of the State: A Dynamic Theory of Secession," Working Papers 1028, Barcelona School of Economics.
    11. 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.
    12. Guimaraes, Bernardo & Sheedy, Kevin D., 2024. "Institutional specialization," Journal of International Economics, Elsevier, vol. 150(C).
    13. 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.
    14. repec:osf:osfxxx:cfrzs_v1 is not listed on IDEAS
    15. Vanschoonbeek, Jakob, 2020. "Divided We Stad: a Fiscal Bargaining Model for Divided Countries," MPRA Paper 101863, University Library of Munich, Germany.
    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. Ben G. Li & Penglong Zhang, 2026. "A Linear Model of Geopolitics," Papers 2603.11292, arXiv.org.
    18. Kobielarz, Michał L., 2024. "A theory of international unions with exits," Journal of Economic Theory, Elsevier, vol. 215(C).
    19. 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.
    20. 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.
    21. 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.
    22. 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).
    23. Kitamura, Shuhei & Lagerlöf, Nils-Petter, 2021. "Cities, Conflict, and Corridors," OSF Preprints cfrzs, Center for Open Science.
    24. Sekeris, Petros G. & Siqueira, Kevin, 2024. "Conflict and returns to scale in production," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).

    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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