Borders and Growth

This paper presents a framework to understand and measure the effects of political borders on economic growth and per capita income levels. We present a model providing a theoretical foundation to estimate empirically the effects of political borders on growth. In our model, political integration between two countries results in a positive country size effect and a negative effect through reduced openness vis-à-vis the rest of the world. We estimate the growth effects that would have resulted from the hypothetical removal of national borders between pairs of adjacent countries. We also identify country pairs where political integration would have been mutually beneficial.