Country size and public good provision

The paper studies the equilibrium size of countries. Individuals in small countries have greater influence over the nature of political decision making while individuals in large countries have the advantage of more public goods and lower tax rates. The model implies that (i) there exists excessive incentives to separate, though this need not be the case for all sets of secession rules studied; (ii) an exogenous increase in public spending decreases country size; (iii) countries with a presidential-congressional democracy are larger than countries with a parliamentary democracy. Unlike previous papers, a rise in public spending thus does not increase the equilibrium country size, which is consistent with the increase in the size of government and the number of countries observed in the last century. The discussion on secession rules puts the excessive incentives result widely found in the literature in a different perspective, and also has implications for organizations like the European Union.