Economic theories of the break-up and integration of nations

This paper surveys the recent political economy literature on the size distribution of nations. The main themes of this literature are: (a) the spread of democracy leads to the creation of too many sovereign states; (b) the extent of factor mobility plays a key role in determining the incentives towards separation or integration; (c) economic integration through the development of international trade may require greater political integration to create and effectively maintain a level playing field in international trade; at the same time, economic integration, by reducing the economic costs of separation, increases the incentives towards political separation.