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The economics of state fragmentation: Assessing the economic impact of secession - Addendum

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  • Jo Reynaerts
  • Jakob Vanschoonbeek

Abstract

Reynaerts and Vanschoonbeek (2016) propose a semi-parametric procedure to estimate the economic impact of secession, finding empirical evidence that declaring independence significantly lowered per capita GDP in newly formed states. To demonstrate that these findings appear to hold irrespective of the estimation procedure employed, this addendum formulates a parametric approach to estimate the independence dividend. Our preferred parametric specifications comprise a dynamic, quasi-myopic model of per capita GDP dynamics that controls for country and year fixed effects, the rich dynamics of GDP, finite anticipation effects and a vector of alternative growth determinants. The results indicate that declaring independence reduces per capita GDP by around 15-20% in the long run. These results are qualitatively confirmed when we use non-regional secession waves to instrument for local incentives to secede.

Suggested Citation

  • Jo Reynaerts & Jakob Vanschoonbeek, 2016. "The economics of state fragmentation: Assessing the economic impact of secession - Addendum," Working Papers of VIVES - Research Centre for Regional Economics 547242, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    • Handle: RePEc:ete:vivwps:547242
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    Cited by:

    1. Thierry Madiès & Grégoire Rota-Grasiozi & Jean-Pierre Tranchant & Cyril Trépier, 2018. "The economics of secession: a review of legal, theoretical, and empirical aspects," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-18, December.
    2. Jo Reynaerts & Jakob Vanschoonbeek, 2022. "The economics of state fragmentation: Assessing the economic impact of secession," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(1), pages 82-115, January.

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    More about this item

    Keywords

    Independence dividend; panel data; dynamic model; generalized method of moments; bootstrap-based bias correction; instrumental variable regression;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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