In the case of countries, the main problem seems to be that as you grow the population becomes more culturally heterogeneous. People on average disagree more with whatever federal policies are chosen, giving them a reason to split off into smaller countries. Also there are increasing coordination costs in size.
In the case of countries, the main problem seems to be that as you grow the population becomes more culturally heterogeneous. People on average disagree more with whatever federal policies are chosen, giving them a reason to split off into smaller countries. Also there are increasing coordination costs in size.
http://www.eco.uc3m.es/docencia/MicroReadingGroup/Ruben.pdf