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The economic effects of political disintegration: Lessons from Serbia and Montenegro

Author

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  • Vassilis Monastiriotis

    (The London School of Economics and Political Science)

  • Ivan Zilic

    (The Institute of Economics, Zagreb)

Abstract

Is there an economic premium from state independence? We shed light on this question by analysing the unique historical case of the peaceful separation of Serbia and Montenegro in 2006-the last fully recognised internationally state-disintegration on European soil. Using the synthetic control approach, we find that independence for the seceding country (Montenegro) had a sizeable but transitory positive effect, boosting GDP per capita in the period immediately following independence, but with gains slowly evaporating in the longer period-which we attribute to increased vulnerability of the newly independent state to fluctuations in the international economic environment. In contrast, for Serbia, we find no evidence of an independence dividend. While these results are context-specific, the resemblance of Serbia and Montenegro’s case with the contemporaneous independence movements in Europe, namely in the realm of policy autonomy pre-separation, provide insights on possible economic outcomes of secessions on the national and supra-national level in Europe.

Suggested Citation

  • Vassilis Monastiriotis & Ivan Zilic, 2019. "The economic effects of political disintegration: Lessons from Serbia and Montenegro," Working Papers 1903, The Institute of Economics, Zagreb.
    • Handle: RePEc:iez:wpaper:1903
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    More about this item

    Keywords

    secession; independence; political disintegration; synthetic control; Western Balkans;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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