The economics of state fragmentation

Assessing the economic impact of secession

Bibliographic Data

ID21653262
AuthorsJo Reynaerts (Faculty of Economics and Business, Research Centre for Regional Economics (VIVES) KU Leuven—University of Leuven Leuven Belgium), Jakob Vanschoonbeek (0000-0001-8405-3430, Faculty of Economics and Business, Research Centre for Regional Economics (VIVES) KU Leuven—University of Leuven Leuven Belgium)
Year2022
Volume37
Issue1
Pages82-115
Publication date2022-01-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueJournal of Applied Econometrics (JOURNAL)
Journal identifiersISSN: 1099-1255 • E-ISSN: 0883-7252
PublisherWiley (PUBLISHER • GB)
DOI10.1002/jae.2857
OpenAlexW3142297421
LanguageEN
Citations received7
References cited46

This paper presents estimates of the economic effects of secession for a large panel of countries that gained independence between 1940 and 2016. It relies on a semi‐parametric identification strategy that controls for the confounding effects of past gross domestic product (GDP) dynamics, anticipation effects, unobserved heterogeneity, model uncertainty, and effect heterogeneity. Our findings indicate that secession lowered per capita GDP, on average by around 24% in the 10th post‐independence year. Nevertheless, the associated cross‐sectional standard deviation of 25% emphasizes that the economic impact of secession also varied widely across countries. A novel procedure to produce confidence intervals around synthetic control estimates of treatment effects demonstrates the statistical significance of the findings. We document the implications for several historical independence waves and connect them to the existing literature. We find tentative evidence that, in decreasing order of relative importance, the adverse effects of independence are disproportionally present in non‐oil producing landlocked countries and are mitigated when newly independent states use their new‐found political autonomy to democratize or to liberalize their trade regime

Econometrics · Economics · Incentive · Macroeconomics · Microeconomics · Per capita · Political science · Real gross domestic product · Secession · Statistics · Economic Growth and Productivity · Fiscal Policy and Economic Growth · Law · Local Government Finance and Decentralization · Mathematics

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