Unitary states and peripheral regions: a model of heterogeneous spatial clubs

Efficiency explanations of the wealth and size of nations provide useful insights into the history and current makeup of nations. We focus here on two related issues that matter, for instance, in large areas such as Western or Eastern Europe, or Canada. We develop an analytical framework for understanding the limits of constitutional unity. This microeconomic model of unitary states deals with two kinds of heterogeneity. First, preference distance or physical distance account for decreasing net benefits from expansion. Second, heterogeneity may involve a discontinuity in the spatial pattern of preferences: “peripheral behaviors” threaten unity. We integrate such behaviors into the model and draw some lessons as to the nature of an optimal constitutional area, discussing in particular the status of peripheral regions.