Alesina & Spolaore: "The Size of Nations"

Alberto Alesina and Enrico Spolaore (2003): The Size of Nations. The MIT Press.
Alesina and Spolaore use the tools of economic analysis to examine the formation and change of political borders. They argue that while these issues have always been at the core of historical analysis, international economists have tended to regard the size of a country as "exogenous," or no more subject to explanation than the location of a mountain range or the course of a river. The authors consider a country's borders to be subject to the same analysis as any other man-made institution. In The Size of Nations, they argue that the optimal size of a country is determined by a cost-benefit trade-off between the benefits of size and the costs of heterogeneity. In a large country, per capita costs may be low, but the heterogeneous preferences of a large population make it hard to deliver services and formulate policy. Smaller countries may find it easier to respond to citizen preferences in a democratic way.
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