Abstract
Is political fragmentation, i.e., nation states, more favorable to economic growth than political unification, i.e., a united empire? This study develops an endogenous-growth model to analyze the growth effects of fragmentation versus unification. Under unification, the economy is vulnerable to excessive Leviathan taxation and possibly subject to the costs of unifying heterogeneous populations. Under fragmentation, the competing rulers are constrained in taxation but spend excessively on military defense. If capital mobility is above (below) a threshold, then fragmentation (unification) would favor growth, and this threshold is increasing in the degree of defense competition and decreasing in the costs of heterogeneity.
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