Disintegration and the proliferation of sovereigns: are there lessons for integration?

This paper examines the pattern of of expanding numbers of sovereign states and postulates a theoretical framework that establishes that sovereignty may increase or decrease steady state income. The authors then use an episodic analysis to compare growth outcomes of countries before and after sovereignty.

The main conclusions are:

• unlike the optimistic expectations, the expansion of sovereignty, which allows national control of economic policies, has not in fact produced universally positive results
• econometric analysis shows that - controlling for the quality of policies - the market size effect is large
• the variance of outcomes has been dramatically increased by the expansion in sovereignty
• deep integration—in the sense of binding commitments on the range of actions of the national sovereign--holds some promise of reducing growth rate variance but would only accelerate mean growth if the effect of increasing market size is not accompanied by a worsening of policies