The Economics of State Fragmentation - Assessing the Economic Impact of Secession

Jo Reynaerts and Jakob Vanschoonbeek

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides empirical evidence that declaring independence significantly lowers per capita GDP based on a large panel of countries covering the period 1950-2013. To do so, we rely on a semi-parametric identification strategy that controls for the confounding effects of past GDP dynamics, anticipation effects, unobserved heterogeneity, model uncertainty and effect heterogeneity. Our baseline results indicate that declaring independence reduces per capita GDP by around 20\% in the long run. We subsequently propose a novel triple-difference procedure to demonstrate the stability of these results. Another methodological novelty consists of the development of a two-step estimator to shed some light on the primary channels driving our results. We find robust evidence that the adverse effects of independence increase in the extent of surface area loss, pointing to the presence of economies of scale, but that they are mitigated when newly independent states liberalize their trade regime or use their new-found political autonomy to democratize.

Keywords: Independence dividend; panel data; dynamic model; synthetic control method; difference-in-difference; triple-difference; two-step approach (search for similar items in EconPapers)
JEL-codes: C14 C32 H77 O47 (search for similar items in EconPapers)
Date: 2016-02-22
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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https://mpra.ub.uni-muenchen.de/69681/1/MPRA_paper_69681.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/72377/1/MPRA_paper_69681.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/76033/1/MPRA_paper_76033.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/86724/9/MPRA_paper_86724.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/90469/1/MPRA_paper_90469.pdf revised version (application/pdf)

Related works:
Journal Article: The economics of state fragmentation: Assessing the economic impact of secession (2022)
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