The process of state formation - economic perspective

In the past century national borders have been redrawn to an enormous extent. Major political changes like World War II and the end of the Cold War along with the decline of Communism resulted in numerous secessions, thus creating a large number of new political actors in Europe. On the other hand in Africa and Asia the end of colonialism was the primarily influencing factor on the emergence of many countries. Along with the rising number of smaller nation states came the increasing importance of supranational institutions like the European Union, NAFTA and ASEAN. The standard economic literature has neglected the importance of nation state formation although the before mentioned events led to grave changes both in the economic and everyday life. In common mainstream models the nation state is exogenously given, space isn`t even considered in modelling. Thus hot topics like the ongoing process of continental bloc-building (either in the economic or in the political sense) and the tendency to smaller countries remain unexplained. In the recent past a series of political economists have won fruitful insights in this area by modelling border formation endogenously. Especially Alberto Alesina`s and Enrico Spolaore`s (AS) seminal work characterizes best how political economy can answer questions about the size of nation states, its change over time and the relation between size and the economic power of a nation. Assuming a basic trade off between economies of scale in the provision of public goods and the cost of preference heterogeneity the optimal number of nation states in terms of maximum utility can be derived analytically depending on the political regime (democracy, dictatorship, benevolent social planner). While these models bear great explanation value regarding subjects like increasing economic integration and the trend for political disintegration, they nevertheless have several shortcomings. Assumptions on the spatial distribution of individuals, their preferences and the perfect correlation between these variables shall guarantee mathematical tractability in closed forms, but in our opinion limit the research unnecessarily. Furthermore the marginalist and comparative static approach to the endogenous change of borders is not appropriate for modelling such a discrete dynamic phenomenon. Another branch of research approaches the topic of state-building from a historic-sociological point of view. Lars- Erik Cederman for instance utilizes agent-based modelling to endogenously describe boundaries and the emergence of political actors. Contrary to the AS model this method allows for the non-linear dynamics of the investigated subject-matter but the existing work neglects the motives of individuals and is therefore not able to explain the influence of political economic variables on the problem at hand. The proposed project tries to combine the best of both approaches in order to overcome the stated shortcomings. We aim for an analysis of border formation and continental bloc-building which weakens some of the rather limiting assumptions of the AS model. The introduction of agent mobility not only removes the perfect correlation between the location and preferences of individuals but enables us to endogenously determine and investigate population distributions different from the often stressed special case of the uniform distribution. By giving up the problematic secession rule A of the AS model (a single individual living on the border between the countries may choose which country it belongs to) another major point for criticism - namely marginal adjustments of borders - is taken care of. The object of investigation is an explanation of the ongoing process of secession on the national level and bloc- building on the supranational level with special emphasis on issues of the expansion of the European Union. Because of the inherent complexity of the presented dynamic setup the analysis of the subject will be conducted by means of agent-based simulation modelling which will and must be accompanied by methods of mathematical economic modelling serving as a benchmark for the former.

The project `The process of state formation - economic perspectives` provides a survey as well as a large variety of detailed insights concerning the scientific modelling attempts that have been made to improve our understanding of how states are forming and dissolving in the course of time. From an empirical point of view it is found that emergence and disappearance of nation states occurs much more often than is commonly believed. With respect to the modelling techniques recently used to mirror these processes (following mainly Alesina & Spoalore) it is concluded that these attempts are characterized by many severe deficiencies. These types of analytical approaches do not seem to point in a direction of fruitful further research; to farfetched are the assumptions they have to make to arrive at analytically treatable models. In contrast to this class of models several other examples, belonging to the class of agent-based simulation models, are studied, and the general conclusion that this class promises more insight is drawn. The project ends with a warning caveat concerning agent-based simulation models: Scientific standards of reproducibility used in other fields of research are not always applied to simulation approaches used in the social sciences yet. The fruitful further elaboration of ABS models should consider this issue.