Political Fragmentation and the Spatial Allocation of Human Capital

The uniquely poly-centric history of Europe’s political system is considered to be one ofthe important reasons of the its economic success, hallmarked as the ‘Great Divergence’. At the same time, political borders are widely known to be barriers to economic integration.This paper tackles this conundrum by showing how Europe’s many borders indeed acted as a barrier to the migration of upper-tail human capital. We present causal evidence that thelatter shaped the economic success of European regions. As such, we show that Europe’s history of political fragmentation should not only be seen as plausible reason for Europe’seconomic success relative to other world regions, but also determined the spatial allocation of prosperity within the continent.