Abstract
Normally, economists take the size of countries as an exogenous variable. Nevertheless,
the borders of countries and their size change, partially in response to economic factors
such as the pattern of international trade. Conversely, the size of countries influences
their economic performance and their preferences for international economic policies –
for instance smaller countries have a greater stake in maintaining free trade. In this
paper, we review the theory and evidence concerning a growing body of research that
considers both the impact of market size on growth and the endogenous determination
of country size. We argue that our understanding of economic performance and of the
history of international economic integration can be greatly improved by bringing the
issue of country size at the forefront of the analysis of growth.
