Chu, Angus C. (2008): Nation States vs. United Empire: Effects of Political Competition on Economic Growth.
This is the latest version of this item.
Download (150kB) | Preview
Is political fragmentation (i.e. nation states) more favorable to economic growth than political unification (i.e. a united empire)? This paper develops a simple endogenous-growth model to analyze the conditions under which economic growth is higher under political fragmentation than under political unification. Under political unification, the economy is vulnerable to excessive Leviathan taxation and possibly subject to the costs of unifying heterogeneous populations. Under political fragmentation, the competing rulers are constrained in taxation but spend excessively on military defense. If and only if capital is sufficiently mobile, then political fragmentation would favor economic growth. When the political regime is chosen by the rulers, they do not always choose the growth-maximizing regime. In particular, there exists a range of parameter values, in which political fragmentation is more favorable to growth but the rulers prefer political unification.
|Item Type:||MPRA Paper|
|Original Title:||Nation States vs. United Empire: Effects of Political Competition on Economic Growth|
|Keywords:||economic growth; Leviathan taxation; interstate competition; political fragmentation|
|Subjects:||H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General
O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth
H - Public Economics > H5 - National Government Expenditures and Related Policies > H56 - National Security and War
|Depositing User:||Angus C. Chu|
|Date Deposited:||12. Dec 2008 16:49|
|Last Modified:||13. Feb 2013 01:26|
Acemoglu, Daron (2008) “Introduction to Modern Economic Growth” book manuscript.
Alesina, Alberto; and Spolaore, Enrico (2003) “The Size of Nations” Cambridge: The MIT Press.
Alesina, Alberto; and Spolaore, Enrico (2005) “War, Peace, and the Size of Countries” Journal of Public Economics, vol. 89, p. 1333-1354.
Arzaghi, Mohammad; and Henderson, J. Vernon (2005) “Why Countries are Fiscally Decentralizing” Journal of Public Economics, vol. 89, p. 1157-1189.
Bernholz, Peter; Streit, Manfred E.; and Vaubel, Roland (1998) “Political Competition, Innovation and Growth: A Historical Analysis” Berlin: Springer-Verlag.
Bernholz, Peter; and Vaubel, Roland (2004) “Political Competition, Innovation and Growth in the History of Asian Civilizations” Cheltenham: Edward Elgar.
Bolton, Patrick; and Roland, Gerard (1997) “The Breakup of Nations: A Political Economy Analysis” Quarterly Journal of Economics, vol. 112, p. 1057-90.
Brennan, Geoffrey; and Buchanan, James M. (1977) “Towards a Tax Constitution for Leviathan” Journal of Public Economics, vol. 8, p. 255-273.
Brennan, Geoffrey; and Buchanan, James M. (1980) “The Power to Tax: Analytical Foundations of a Fiscal Constitution” Cambridge University Press.
Chaudhry, Azam; and Garner, Phillip (2006) “Political Competition Between Countries and Economic Growth” Review of Development Economics, vol. 10, p. 666-682.
Chaudhry, Azam; and Garner, Phillip (2007) “Do Governments Suppress Growth? Institutions, Rent-Seeking, and Innovation Blocking in a Model of Schumpeterian Growth” Economics and Politics, vol. 19, p. 35-52.
Dockner, Engelbert J.; Jorgensen, Steffen; Long, Ngo Van; and Sorger, Gerhard (2000) “Differential Games in Economics and Management Science” Cambridge: Cambridge University Press.
Drazen, Allan (2000) “Political Economy in Macroeconomics” Princeton: Princeton University Press.
Edwards, Jeremy; and Keen, Michael (1996) “Tax Competition and Leviathan” European Economic Review, vol. 40, p. 113-134.
Fudenberg, Drew; and Tirole, Jean (1991) “Game Theory” Cambridge: The MIT Press.
Hirshleifer, Jack (1991) “The Technology of Conflict as an Economic Activity” American Economic Review, vol. 81, p. 130-134.
Jones, Eric L. (1981) “The European Miracle” Cambridge: Cambridge University Press.
Karayalcin, Cem (2008) “Divided We Stand, United We Fall: The Hume-North-Jones Mechanism for the Rise of Europe” International Economic Review, vol. 49, p. 973-997.
Karp, Larry; and Lee, In Ho (2003) “Time-Consistent Policies” Journal of Economic Theory, vol. 112, p. 353-364.
North, Douglass (1981) “Structure and Change in Economic History” New York: Norton.
Persson, Torsten; and Tabellini, Guido (1992) “The Politics of 1992: Fiscal Policy and European Integration” Review of Economic Studies, vol. 59, 689-701.
Persson, Torsten; and Tabellini, Guido (2000) “Political Economics: Explaining Economic Policy” Cambridge: The MIT Press.
Rauscher, Michael (1998) “Leviathan and Competition among Jurisdictions: The Case of Benefit Taxation” Journal of Urban Economics, vol. 44, p. 59-67.
Xie, Danyang (1997) “On Time Inconsistency: A Technical Issue in Stackelberg Differential Games” Journal of Economic Theory, vol. 76, p. 412-430.
Available Versions of this Item
Nation States vs. United Empire: Effects of Political Competition on Economic Growth. (deposited 18. Apr 2008 14:41)
Nation States vs. United Empire: Effects of Political Competition on Economic Growth. (deposited 28. Apr 2008 07:14)
- Nation States vs. United Empire: Effects of Political Competition on Economic Growth. (deposited 12. Dec 2008 16:49) [Currently Displayed]
- Nation States vs. United Empire: Effects of Political Competition on Economic Growth. (deposited 28. Apr 2008 07:14)