Klaus Desmet () (Universidad Carlos III, Getafe (Madrid), Spain, and CEPR)  Michel Le Breton (Universit´e de Toulouse I, GREMAQ and IDEI, Toulouse, France)  Ignacio Ortunoâ€Ortin () (Universidad Carlos III, Getafe (Madrid), Spain)  Shlomo Weber () (Southern Methodist University, Dallas, USA, CORE, Catholic University of Louvain, Louvain-la-Neuve, Belgium, and CEPR)
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This paper presents a model of nations where culturally heterogeneous agents vote on the optimal level of public spending. Larger nations beneï¬t 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 conï¬gurations, thus determining the likelihood of secession or uniï¬cation. We provide empirical support for choosing genetic distances as a proxy of cultural heterogeneity and by using data on genetic distances, we examine the stability of the current map of Europe. We then identify the regions prone to secession and the countries that are more likely to merge. Furthermore, we estimate the welfare gains from European Union membership.
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Paper provided by International School of Economics at TSU, Tbilisi, Republic of Georgia in its series Working Papers with number
003-08.
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