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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. Baqir, Reza & Easterly, William & Alesina, Alberto, 1999. "Public Goods and Ethnic Divisions," Scholarly Articles 4551797, Harvard University Department of Economics.
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  8. GINSBURGH, Victor & ORTUNO-ORTIN, Ignacio & WEBER, Shlomo, 2004. "Disenfranchisement in linguistically diverse societies. The case of the European Union," CORE Discussion Papers 2004080, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. BOGOMOLNAIA, Anna & LE BRETON, Michel & SAVVATEEV, Alexei & WEBER, Shlomo, 2006. "Stability under unanimous consent, free mobility and core," CORE Discussion Papers 2006007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  17. Giuliano, Paola & Spilimbergo, Antonio & Tonon, Giovanni, 2006. "Genetic, Cultural and Geographical Distances," IZA Discussion Papers 2229, Institute for the Study of Labor (IZA).
  18. Dreze, J H & Greenberg, J, 1980. "Hedonic Coalitions: Optimality and Stability," Econometrica, Econometric Society, vol. 48(4), pages 987-1003, May.
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  22. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September.
  23. 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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  25. Fearon, James D, 2003. " Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
  26. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
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