This paper presents a model of nation formation in which culturally heterogeneous agents vote on the optimal level of public spending. Larger nations benefit from increasing returns in the provision of public goods, but bear the costs of greater cultural heterogeneity. This tradeoff induces agents? preferences over different geographical configurations, thus determining the likelihood of secession and unification. We provide empirical support for choosing genetic distances as a proxy of cultural heterogeneity. By using data on genetic distances, we examine the stability of the current map of Europe and identify the regions prone to secession and the countries that are more likely to merge. Our framework is further applied to estimate the welfare gains from European Union membership.
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
2006095.
Find related papers by JEL classification: H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General H40 - Public Economics - - Publicly Provided Goods - - - General
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Enrico Spolaore & Romain Wacziarg, 2009.
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