Li, Ben, and Penglong Zhang. “International geopolitics”. Boston College Working Papers in Economics 909, 2017. http://hdl.handle.net/2345/bc-ir:107304.
Since the Age of Discovery, the world has grown integrated economically while remaining disintegrated politically as a collection of nation-states. The nation-state system is robust because borders, as state dividers, interact with economic integration to absorb shocks. We build a tractable general equilibrium model of international trade and national borders in the world. Over a longer time horizon, declining trade costs alter trade volumes across states but also incentivize states to redraw borders, causing states to form, change, and dissolve. Our model offers significant implications for the global economy and politics, including trade patterns, political geography, its interplay with natural geography, state-size distribution, and the risks of militarized disputes. These implications are supported by modern and historical data.