In a world of trade restrictions, large countries enjoy economic benefits, because political boundaries determine the size of the market. Under free trade and global markets even relatively small cultural, linguistic or ethnic groups can benefit from forming small, homogeneous political...

Around the world one observes a tendency toward political separatism. The economic literature generally (but not always) emphasizes several benefits of large fiscal (and, therefore, political) jurisdictions. In this paper we discuss several politico-economic arguments which reconcile this...

This paper provides a formal model of endogenous border formation and choice of defense spending in a world with international conflict. We examine both the case of democratic governments and of dictatorships. The model is consistent with three observations. First, breakup of countries should...

This paper studies the relationship between international conflict and the size distribution of countries in a model in which both peaceful bargaining and nonpeaceful confrontations are possible. We show how the size distribution of countries depends on the likelihood, benefits, and costs of...

This paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward-looking wage-setters. If discretionary policies are followed, an economic cycle related to the political cycle results in equilibrium. This cycle is...

This paper studies whether the dynamic behaviour of GNP growth, unemployment and inflation is systematically affected by the timing of elections and of changes of governments. The sample includes the last three decades in 18 OECD economies. We explicitly test the implication of several models of...

We investigate whether political jurisdictions form in response to the tradeâ€off between economies of scale and the costs of a heterogeneous population. We consider heterogeneity in income, race, ethnicity, and religion, and we test the model using American school districts, school...

This paper shows that smaller countries have a larger share of public consumption in GDP, and are also more open to trade. These empirical observations are consistent with recent theoretical models explaining country formation and break up, and may account for the observed positive empirical...

This paper examines the evidence on fiscal adjustments in OECD countries from the early 1960s to today. The results shed light on the recently observed phenomenon of fiscal tightening that produces (non-Keynesian) expansionary effects. One interpretation is that a serious fiscal tightening...