Public Choice

, Volume 175, Issue 1–2, pp 111–134 | Cite as

How defense shapes the institutional organization of states

  • Fabio Padovano
  • Yvon RocaboyEmail author


We analyze theoretically how the provision of military services explains the vertical and horizontal fragmentation of a state. The model innovates on the previous political economy literature which views such institutional arrangements arising only as a response to internal ”technological” forces, not to strategic interactions within the state and with neighboring states. The model explains how these interactions lead communities of individuals to choose among three alternative types of institutional arrangements: 1) a union, i.e., a setting wherein both the vertical and the horizontal fragmentation of a state is minimized; 2) an alliance, whereby a state becomes more vertically fragmented by creating an upper government tier devised to take advantage of economies of scale; 3) autonomy, where horizontal fragmentation is maximized, as no merging of communities occurs and no higher government tier is created. A series of simulations of the model define the conditions under which each alternative institutional arrangement emerges in equilibrium.


Institutional organization Military goods Vertical and horizontal fragmentation Strategic interactions between countries 

JEL Classification

C35 D70 H40 H72 



Earlier versions of this paper were presented at the 2015 EPCS Meeting in Groningen, the Netherlands, the Seminars of the CREM at the University of Rennes 1, France, and at the University of Roma Tre, the 2016 SIEP Conference in Lecce, Italy, and the 2016 PEARL seminar in Santiago de Compostela, Spain. We thank participants in those conferences. We also are grateful to Peter Leeson, Enrico Spolaore, William F. Shughart II and two anonymous referees for their valuable comments and suggestions. Part of the paper was written while the second author was visiting the Crawford School of Public Policy at the Australian National University, Canberra. Yvon Rocaboy is grateful to Professor Robert Breunig, director of the Crawford School, for his kind hospitality and support. The usual caveat applies.


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Authors and Affiliations

  1. 1.CREM-CNRS, Condorcet Center for Political EconomyUniversity of Rennes 1Rennes CedexFrance
  2. 2.DSPUniversity of Roma TreRomeItaly

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