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The Stability and Breakup of Nations: A Quantitative Analysis

  • Klaus Desmet
  • Michel Le Breton
  • Ignacio Ortuno-Ortin
  • Shlomo Weber

This paper presents a model of nations where 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 secessions or unions. After calibrating the model to Europe, we identify the regions prone to secession and the countries most likely to merge. As a test of the theory, we show that the model can account for the breakup of Yugoslavia and the dynamics of its disintegration. We also provide empirical support for the use of genetic distances as a proxy for cultural heterogeneity.

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File URL: http://www.econ.kuleuven.be/VIVES/publicaties/discussionpapers/DP/DP2009/vivesdiscussionpaper10.pdf
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Paper provided by Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, Vives in its series Vives discussion paper series with number 10.

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Date of creation: 2009
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Handle: RePEc:ete:vivwps:10
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  2. Demange, Gabrielle, 1994. "Intermediate preferences and stable coalition structures," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 45-58, January.
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  7. Anna Bogomolnaia & Michel Breton & Alexei Savvateev & Shlomo Weber, 2007. "Stability under unanimous consent, free mobility and core," International Journal of Game Theory, Springer, vol. 35(2), pages 185-204, January.
  8. Wacziarg, Romain & Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio, 2002. "Fractionalization," Research Papers 1744, Stanford University, Graduate School of Business.
  9. Greenberg, Joseph, 1977. "Existence of an equilibrium with arbitrary tax schemes for financing local public goods," Journal of Economic Theory, Elsevier, vol. 16(2), pages 137-150, December.
  10. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
  11. Breton, M. le & Weber, S., 1992. "Stability of Coalition Structures and the Principle of Optimal Partitioning," Papers 93-6, York (Canada) - Department of Economics.
  12. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank.
  13. Spolaore, Enrico & Wacziarg, Romain, 2002. "Borders and Growth," Research Papers 1761, Stanford University, Graduate School of Business.
  14. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
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  16. Jehiel, Philippe & Scotchmer, Suzanne, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 393-413, April.
  17. Ashraf, Quamrul & Galor, Oded, 2008. "Human Genetic Diversity and Comparative Economic Development," CEPR Discussion Papers 6824, C.E.P.R. Discussion Papers.
  18. Giuliano, Paola & Spilimbergo, Antonio & Tonon, Giovanni, 2006. "Genetic, Cultural and Geographical Distances," IZA Discussion Papers 2229, Institute for the Study of Labor (IZA).
  19. Ginsburgh, Victor & Ortuño-Ortín, Ignacio & Weber, Shlomo, 2005. "Disenfranchisement in Linguistically Diverse Societies: The Case of the European Union," CEPR Discussion Papers 4875, C.E.P.R. Discussion Papers.
  20. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  21. Fearon, James D, 2003. " Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
  22. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
  23. Ashraf, Quamrul & Galor, Oded, 2007. "Cultural Assimilation, Cultural Diffusion and the Origin of the Wealth of Nations," CEPR Discussion Papers 6444, C.E.P.R. Discussion Papers.
  24. Dreze, J.H. & Greenberg, J., . "Hedonic coalitions: optimality and stability," CORE Discussion Papers RP -403, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  25. Bogomolnaia, Anna & Jackson, Matthew O., 2002. "The Stability of Hedonic Coalition Structures," Games and Economic Behavior, Elsevier, vol. 38(2), pages 201-230, February.
  26. Milchtaich, Igal & Winter, Eyal, 2002. "Stability and Segregation in Group Formation," Games and Economic Behavior, Elsevier, vol. 38(2), pages 318-346, February.
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