What are the effects of increased trade in goods and services on the trade balance? We study the effects of reducing transport costs in a Ricardian model with complete asset markets. Trade integration has three effects on the structure of the economy: a reduction in the home bias in consumption,...

We use the new dataset of trade flows across 269 European regions in 24 countries constructed in Santamaría et al. (2020) to systematically explore for the first time trade patterns within and across country borders. We focus on the differences between home trade, country trade and foreign...

After decades of successful growth, economic unions have recently become the focus of heightened political controversy. We argue that this is partly due to the growth of trade between countries that are increasingly dissimilar. We develop a theoretical framework to study the effects on trade,...

We analyze the conduct of fiscal policy in a financially integrated union in the presence of financial frictions. Frictions create a wedge between the return to investment and the union interest rate. This leads to an over-spending externality. While the social cost of spending is the return to...

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...