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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://feb.kuleuven.be/VIVES/publicaties/discussionpapers/DP/DP2009/vivesdiscussionpaper10.pdf
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Paper provided by KU Leuven, Faculty of Economics and Business, VIVES Research Centre for Regional Economics in its series Working Papers VIVES Research Centre for Regional Economics with number 10.

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Date of creation: 2009
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Handle: RePEc:ete:vivwps:10
Contact details of provider: Web page: https://feb.kuleuven.be/VIVES/vivesenglish/general/

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