Freeman Spogli Institute for International Studies Stanford University


FSI Stanford Publications


Borders and Growth

Working Paper

Authors
Enrico Spolaore
Romain Wacziarg - Stanford University

Published by
CDDRL Working Papers, page(s): 55
August 2004


This paper presents a framework to understand and measure the effects of political borders on economic growth and per capita income levels. In our model, political integrationbetween two countries results in a positive country size effect and a negative effect through reduced openness vis-à-vis the rest of the world. Additional effects stem from possible changes in other growth determinants, besides country size and openness, when countries are merged. We estimate the growth effects that would have resulted from the hypothetical removal of national borders between pairs of adjacent countries under various scenarios. We identify country pairs where political integration would have been mutually beneficial. We find that full political integration would have slightly reduced an average country's growth rate, while most countries would benefit from a more limited form of merger, involving higher economic integration with their neighbors.