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Globalization and political structure

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Abstract

The first wave of globalization (1830-1914) witnessed a decline in the number of countries from 125 to 54. Political consolidation was often achieved through war and conquest. The second wave of globalization (1950-present) has led instead to an increase in the number of countries to a record high of more than 190. Political fragmentation has been accompanied by the creation of peaceful structures of supranational governance. This paper develops a theoretical model of the interaction between globalization and political structure that accounts for these trends and their reversal. We show that political structure adapts to steadily expanding trade opportunities in a non-monotonic way. Borders hamper trade. In its early stages, the political response to globalization consists of removing borders by increasing country size. War is then an appealing way of conquering markets. In its later stages, however, the political response to globalization is to remove the cost of borders by creating international economic unions. As a result, country size declines and negotiation replaces war as a tool to ensure market access.

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  • Gino Gancia & Giacomo A. M. Ponzetto & Jaume Ventura, 2016. "Globalization and political structure," Economics Working Papers 1513, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2017.
  • Handle: RePEc:upf:upfgen:1513
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    References listed on IDEAS

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    1. Ben Lockwood, 2002. "Distributive Politics and the Costs of Centralization," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 313-337.
    2. Federico Boffa & Amedeo Piolatto & Giacomo A. M. Ponzetto, 2016. "Political Centralization and Government Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 131(1), pages 381-422.
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    6. repec:dgr:kubcen:2012033 is not listed on IDEAS
    7. Roberto Bonfatti, 2012. "Trade and the Pattern of European Imperialism, 1492-2000," Economics Series Working Papers 618, University of Oxford, Department of Economics.
    8. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    9. Alessandra Casella & Jonathan S. Feinstein, 2002. "Public Goods in Trade on the Formation of Markets and Jurisdictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 437-462, May.
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    1. repec:eee:inecon:v:108:y:2017:i:c:p:137-156 is not listed on IDEAS
    2. 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.

    More about this item

    Keywords

    Globalization; political structure; size of countries; international unions.;

    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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