Conflict, Defense Spending and the Number of Nations

Abstract:

This paper provides a formal model of endogenous border formation and of choice of defense spending in a world with international conflict. The model is consistent with three observations. First, break–up of countries should follow a reduction in the likelihood of international conflicts. Second, the number of regional conflicts between smaller countries may increase as a result of the break–up of larger countries. Third, the size of the peace dividend — i.e., the reduction in the defense spending in a more peaceful world — is limited by the process of country break–up.