The economics of secession: a review of legal, theoretical ...ORIGINAL ARTICLE Open Access The economics of secession: a review of legal, theoretical, and empirical aspects Thierry

Swiss Journal of Economics and Statistics

Madiès et al. Swiss Journal of Economics and Statistics (2018) 154:19 DOI 10.1186/s41937-017-0015-6

ORIGINAL ARTICLE Open Access

The economics of secession: a review oflegal, theoretical, and empirical aspects
Thierry Madiès1*, Grégoire Rota-Grasiozi2, Jean-Pierre Tranchant3 and Cyril Trépier4
Abstract

The aim of this paper is to present a review of the legal, theoretical, and empirical aspects of secessions from aneconomic perspective. This survey provides interesting insights into recent events such as the Brexit and the threatof secession made for instance by Scotland and Catalonia. International law does not grant a general right tosecede, nor does it forbid secession. Furthermore, there are several modalities of secessions, which turn out to beimportant for new states that want to get an international recognition. For its part, the economic theory showsthat the decision for a region to remain in a country (or a union) or to secede eventually results from a trade-offbetween the benefits of being part of a large country, on the one hand, and the costs often associated to moreheterogeneity, on the other hand. The latter are generally more important for those regions which are “far away”from the central (federal) government. Empirical literature confirms the importance of these trade-offs and showsthat decentralization may be effective to accommodate secessionist conflicts only if certain conditions arefulfilled.

IntroductionNeither the binding referendum held in Scotland on 18December 2014, nor the unilateral declaration of inde-pendence in Catalonia on 27 October 2017 created a newstate. The former gave victory to the “No”; the latter, lesswell prepared than the Scottish referendum, led to thedestitution of the Catalan government and to newregional elections to be held on 21 December 2017.Despite their differences, both events remind us that statesare not immutable. Separatist forces are still present incertain EU member states. In their seminal and influentialpaper about the breakup of nations, Bolton and Roland(1997) state that “the entire map of Europe, from theAtlantic Coast to the Urals, is being redrawn and issues ofseparation, unification, and the redrawing of borders areyet again at the forefront of European concerns. Many ofthe issues raised by this process are primarily of a political,cultural or linguistic nature. However, there are alsoeconomic considerations that bear on this problem”.

* Correspondence: [email protected] of Economics, University of Fribourg, Fribourg, SwitzerlandFull list of author information is available at the end of the article

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Switzerland has not escaped from secessionist desires.The most famous case is that of the Canton of Jura whichwas created on 1 January 1979 after having seceded fromthe Canton of Berne. Dominicé (2006) points out that“when for a specific matter there is no federal rule, inter-national law is applied as a substitute […] In the case ofthe Canton of Jura, important questions were settled byreference to customary international law under the laws ofState secession.”Secessionism is obviously not only a threat to European

states but is also a concern in a great number of develop-ing and ethnically fragmented countries, where it takesoften a violent form. Since World War II, the number ofnew sovereign states has dramatically increased from 51in 1945 to 99 in 1960 and to 195 in 2017 mainly due tothe decolonization process of the 1960s and the breakupof the Soviet Union and Yugoslavia in the 1990s. Sambaniset al. (2017) estimate the number of groups that havemade separatist claims in 120 countries over the period1945–2012 at 464, that is to say twice as much as the fig-ures provided by former studies.Widespread secessionism exists even in the face of high

uncertainty about the economic impact of secessions. Infact, secessions may well be economically costly. Smallercountries face a steeper cost of providing public goods,and their small internal markets do not allow to reach

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maximum efficiency in the production of private goods(except if they enjoy the proximity to a large integratedmarket such as the European single market). Indeed, Rey-naerts and Vanschoonbeek (2016) estimate that newly in-dependent countries tend to grow more slowly than othercomparable countries. The authors find, on average, thatthe cost of secession is equivalent to 20% of GDP percapita, and it remains strong in the long run. There seemsto be, however, a considerable variation: Secessions seemto have been particularly costly among ex-USSR Republicsand French colonies but to have been much less costly inex-Yugoslavia and ex-Czechoslovakia.The fact that so many regions seek independence—even

when secession is associated with economic costs—suggeststhat there are strong non-economic benefits of secession.Economic theory assumes that the greater homogeneity(geographically, culturally, linguistically, and otherwise) thatcharacterizes smaller countries explains the importance ofnon-economic benefits. Regions that are geographically andculturally distant from the center may not receive muchpublic goods and/or may have sharply distinct preferenceson the type of public good they want. Some proponents ofScottish independence argued that secession would indeedbe desirable as the preferences of Scots on social policy arevery different from those of the rest of the UK. Desmetet al. (2011) argue that the breakup of the ex-Yugoslaviawould not have happened for economic reasons alone andrequired a preference for cultural homogeneity.Both political and fiscal decentralization have been widely

used by central governments as a means to accommodatethe claim of geographically concentrated groups andminorities for self-determination, with mixed results. Thismay be explained by three main reasons: The first one isthat decentralization tends to be used by central govern-ments to appease separatists, hence a seemingly positive re-lationship between centrifugal forces and decentralization.The second one is that subnational groups or entities thatare granted greater autonomy might use the availableresources in their hands to foster separatist tendencies. Thethird reason is that decentralization may have differentmeanings for central (federal) governments and subnationaljurisdictions. Central governments very often want to retainpower so that decentralization actually boils down to a sim-ple deconcentration, i.e., responsibilities over taxes andpublic expenditures are actually transferred to a representa-tive of the central government at the subnational level andnot to locally elected officials (Dafflon and Madiès 2011).The aim of this paper is to present a survey on seces-

sions covering both legal issues and the main contribu-tions of the economic literature, with a particular focus onthe question as to whether decentralization fosters or hin-ders the desire to secede. More specifically, the paper isorganized as follows. The first part deals with both inter-national and EU law regarding the secession phenomenon.

The second part presents the main contributions of theeconomic theory of secessions. The third part presentsempirical evidence that confirms the main determinantsof secessions identified by the theory. A more specificfocus is put on ethnic conflicts and decentralization.

The secession phenomenon as both theinternational and EU law regard itWe first present what the international law says aboutsecessions. Then, we deal with the different modalities ofseparation and analyze some recent secession processes.Finally, we take a look at the EU law. It must be noticedthat “international law does not grant sub-state entities ageneral right to secede from their parent states, nor does itprohibit secession” (Roethke 2011).1 Regarding the EU law,it must be remembered that the European Union has sofar never experienced any internal secession in which thenew state wanted to join the organization. Indeed, neitherAlgeria in 1962 when becoming independent from Francenor Greenland in 1979 when obtaining home rule fromDenmark wanted to be part of the European EconomicCommunity. Besides, even if the European map has chan-ged considerably since the collapse of Soviet Union in1991, the numerous newly created states seceded beforebecoming EU member states.

The procedures of secession under the international lawFor newly created countries, obtaining a wide inter-national recognition is not a mere formality. Indeed, inter-national law recognizes the right to self-determinationonly in the cases of decolonization process and for groupsdiscriminated against on the account of an ethnic minoritystatus. The right to self-determination is protected by theArticle 1.2 of the United Nations Charter signed in 1945,which reads: “To develop friendly relations among nationsbased on respect for the principle of equal rights and self-determination of peoples, and to take other appropriatemeasures to strengthen universal peace.” This generalprinciple was strengthened later on when the United Na-tions General Assembly voted on 12 December 1960 the1514 Resolution2 called “Declaration on the granting ofindependence to colonial countries and peoples” (Rosiere2010). Once adopted, the resolution became the norm tointerpret the right of people to self-determination in theEuropean colonies. Yet, it appeared quite difficult to deter-mine exactly the application field of this right, since othersituations where “peripheries” consider themselves domi-nated by a “center” present some similarity with the situ-ation in former European colonies: Siberia in Russia,Abkhazia in Georgia, Western Sahara in Morocco, andTibet and Xinjiang in China for instance. The UN reso-lution 61/295 adopted on 13 September 2007 and entitled“Declaration on the Rights of Indigenous peoples” tendsto extend the scope of implementation of the self-


determination right to any place in the world and to en-able any territory to claim this right when it asserts “thefundamental importance of the right to self-determinationof all peoples, by virtue of which they freely determinetheir political status and freely pursue their economic, so-cial, and cultural development”.3 More specifically, it maybe argued that a subset of people within a country whowould suffer from “serious breaches of fundamental hu-man and civil rights” through the “abuse of ‘sovereignpower’ could be recognized the right to separate from the‘offending state” (Tancredi 2006).Nevertheless, the international community sets some

limits to the application of the self-determination right toavoid an avalanche of secession claims. One of these is theprinciple of respect for the state’s territorial integrity, sinceit can be understood as protecting both internal and exter-nal borders of a state.4 The previously mentioned UN1514 Resolution of 12 December 1960 states in its article6 that “any attempt aimed at the partial or total disruptionof the national unity and the territorial integrity of a coun-try is incompatible with the purposes and principles of theCharter of the United Nations”.Yet, the United Nations has considered on several occa-

sions that separation was a legitimate conflict resolutionmode. It did so in Eastern Timor in 1999—where its inter-vention was necessary to get Indonesia to accept the out-come of the popular vote—in Bougainville in 2001 or inSouthern Sudan in 2011. Those three cases show that self-determination has become a norm for nonviolent separa-tions. In the case of Bougainville, which claims its separ-ation from Papua New Guinea, the 2001 peace agreementincludes a self-determination referendum, which shouldtake place in 2019.Each binding self-determination referendum requires de-

termining who votes, how the vote must take place, andwhich territory is implied. Yet, the international recognitionis crucial to determine the success or failure of a separationprocess.

Different modalities of secessionThe following table shows that three modalities of seces-sion exist under the international law: An armed conflict(like in Croatia), a unilateral separation (Kosovo), and anagreement with the central state (Montenegro). These sit-uations have in common that the desire for secessioncomes from one part of the initial territory. In turn, anunanimous will of separation, representing the wholepopulation and territory of a state, provokes a scission.The initial state is dissolved in favor of several entities. Arecent example of a scission is the separation of the Czechand Slovak Federal Republic into Czech Republic andSlovakia on 31 December 1992, which was negotiated bygovernments. We call successor state a state which haslost a part of its territory by secession but keeps existing

under international law. Among others, it was the case ofPakistan after the secession of Bangladesh in 1971, ofEthiopia when Eritrea became independent in 1993, ofSerbia after the separation of Montenegro in 2006, and ofSudan after the independence of South Sudan in 2011.Nevertheless, both a separation and a scission may pro-voke the dissolution of the initial state. Indeed, if after oneor several secessions a state is regarded as substantiallydifferent from the initial state, it may lose its juridical per-sonality and transform itself into a new state. As an illus-tration, we may recall that the Yugoslavian FederalRepublic was not recognized as the continuator state afterfour out of six of its entities became independent.Independence obtained through a unilateral declaration

has very little chance, if at all, to be followed by a recogni-tion from other sovereign states. Besides, the unilateralseparation of a territory does not make it instantaneouslyindependent without a negotiation with the central state.It implies that a separation of states requires two actors,or even three if the central state belongs to the EuropeanUnion, to materialize. Hence, the interest of determiningwhat the EU law says about independence inside the EU.

A selection of secession processes since 19915

New state
Year Context of secession Modality of secession
Baltic statesLithuania,Latvia,Estonia

1990
The 3 Baltic states, whichwere Socialist Republicsfor 45 years, rejected theofficial vision of a“voluntary adhesion” tothe USSR. Theyexperienced a briefindependence between1918 and 1940.Independence was notclaimed as secession, butto re-establish the “pre-existing state sovereigntyconfiscated by a neighborpower” according to inter-national laws.August 23, 1989, a hugehuman chain connectedthe 3 Baltic capitals.The 3 Republics facedeconomic and militarypressure from Moscowand boycotted the federalreferendum of March 17,1991, on a renovatedUnion.
Unilateral declarations(March 11, 1990, inLithuania and August21, 1991, for Latviaand Estonia).New Russian PresidentB. Yeltsin recognizedthem on Sep. 6, 1991.September 17, 1991,the 3 Baltic statesbecome UN memberstates.They joined EU in2004.

Slovenia
1991 The richest province ofYugoslavia preparedindependence beforeCroatia.At first, Slovenia called fora transformation ofYugoslavia into aconfederation.The Parliament thenvoted constitutional
Declaration ofindependence fromYugoslavia on July 25,1991.After an interventionof the Yugoslavianarmy and a 3-day con-flict, a ceasefire wassigned on June 28,1991.


(Continued)

amendments and adeclaration of sovereignty.Citizens backed secessionby a referendum inDecember 1990.

Independence willwas reasserted inOctober 1991 andbacked by anarbitrationcommission of EEC.Germany recognizedSlovenia as a state inDecember 1991; then,the other EU statesdid so in January1992.

Croatia
1991 The second richestprovince of Yugoslaviaheld its first free electionsin 1990, with a victory ofa nationalist party, HDZ.In a referendum held inMay 1991, 94% ofCroatian voters backedindependence.Croatian leaders made itclear they were inspiredby Slovenia’s project ofindependence.
Declaredindependence fromYugoslavia on July 25,1991.Serbs from Krajinasoon backed by thefederal army, attackedCroatia, triggering awar until December1995.The EEC first rejectedrecognizing Croatia asa state, but Germanydid so in December1991. The UNintervened in March1992.

Eritrea
1993 An independencemovement againstEthiopia appeared in 1961in Eritrea. In 1952, Eritreawas attached to thecrown of Ethiopia as afederal state but becamea province of Ethiopia by1962. After 30 years ofconflict, the mainindependence movementopened negotiations withthe Ethiopian governmentin 1991, once GeneralMengistu’s regime wasdissolved.
An official bindingreferendum on theindependence ofEritrea was held inApril 1993 with UNobserver mission.Independence fromEthiopia received anoverwhelmingsupport (99.83% ofvoters) while theturnout reached98.2% of registeredvoters.

Slovakia andCzechRepublic

1993
Both formed the Czechand Slovak FederativeRepublic (April 23, 1990–December 31, 1992)created after the Czechand Slovak SocialistRepublic (1948–1990) wasdissolved.In June 1992, eachrepublic held freeelections, and then, CzechPrime Minister VaclavKlaus and Slovakian Primeminister Vladimir Meciaropened negotiations todisband the federation.
Separation in 2independent stateswas proclaimed onJanuary 1, 1993.The Velvet divorcewas a peacefulprocess but wasinitiated by bothgovernments, not bythe citizens.Both states joined theEU in 2004.

Quebec
1995 The question ofindependence was puttwice to the vote ofcitizens of Quebec, aprovince of the federalstate of Canada. After the1980 official binding
Independence fromCanada was rejected(50.58% against,49.42% in favor) as aresult of a referendumwith anunprecedented

(Continued)

referendum in whichsecession had beenrejected, a new one tookplace on October 30,1995. The Supreme Courtof Canada issued in 2000the so-called law of claritywhich set two conditionsfor a further independ-ence referendum of aCanadian province: Thequestion should refer toindependence, and theresult should “result on aclear expression of thewill of the population.”

turnout: 93.25% of theelectorate.

East Timor
2002 In this former colony ofPortugal, severalmovements pro-independence appearedin 1974. One of them, theFretilin, claimed the inde-pendence of East Timoron November 28, 1975.9 days later, on December7, 1975, Indonesialaunched a militaryoccupation of East Timor,an Indonesian provincefrom July 1976.The conflict continuedwhile several powers(USA, Australia, USSR)backed Indonesia againstTimor.Once Suharto was forcedto leave power in 1998,new President Habibiefinally accepted in 1999 aUN-negotiated agreementincluding a short-termconsultation on a wideautonomy project for EastTimor.
The consultation tookplace on August 30,1999, despite violenceand intimidationagainst civilians frompro-Indonesian mili-tias. The turnoutreached 99.6% of reg-istered voters, and78.5% of themrejected autonomy,therefore backingindependence.Heavy violenceperpetrated after thevote by pro-Indonesian militias.President Habibie onlyaccepted the result ofthe vote on October19, 1999, after theintervention of a UNpeace force.After a provisoryadministration by theUnited Nations (1999–2002) East Timorproclaimed itsindependence on May2002.

Montenegro
2006 In Montenegro, there is along-standing will of apeaceful independencefrom Serbia.In a previous referendumheld in 1992, 95.96% ofthe population voted toremain in the federation.In 2000, while Serbia andMontenegro were alreadynegotiating separation,the EU required a two-step process: an agree-ment on terms of separ-ation and an officialbinding referendum.
Independence fromYugoslavia gained a55.5% approval with aturnout of 86.5% onMay 21 2006, bindingreferendum.EU had set athreshold of 55% ofvoters and a minimalturnout of 50% tovalidate thereferendum.Independence wasproclaimed on June 3,2006.

Kosovo
2008 Having lost its autonomystatus in 1989, the Serbianprovince initiated apeaceful fight to recoverit.
A unilateraldeclaration from theKosovar Parliament onFebruary 17, 2008,made the country anindependent state.


(Continued)

A war took place (1998–2001) despiteinternational mediation(1998 and 1999).Kosovo is put under aprovisory UNadministration (MINUK)from 1999.UN special envoy MarttiAhtisaari issued onFebruary 2, 2007, aproposition of resolutionincluding “anindependence underinternational control” forKosovo. Both Serbia andRussia rejected it,maintaining the gridlock.

Belgrade denouncedthat declaration asillegal.A new UN mission isdeployed all overKosovo in December2008.Seized by the Serbiangovernment on thatunilateral process ofsecession occurred on17 February 2008, theCourt of Justice in TheHague declared itconform to theinternational law.A normalizationagreement firmedwith Serbia on April 92013.111 UN memberstates recognizedKosovo by 2016, but 5EU states refuse to doso: Spain, Slovakia,Rumania, Cyprus, andGreece.

South Sudan
2011 Two civil wars (1955–1972and 1983–2005) tookplace in Sudan. After thesecond one, a peaceagreement signed in 2002opened the way for abinding independencereferendum in SouthSudan within 6 years, onJanuary 9, 2011.That referendum was heldwith internationalobservers.
Independence fromSudan gained anoverwhelmingsupport at the January2011 referendum:98.83% of voters for“Yes”, and turnoutreached 97.58% ofregistered voters, farbeyond the requiredturnout of 60%.Independenceproclaimed on July 9,2011.Both civil wars inSudan are responsiblefor at least 2.5 milliondeaths.A civil war broke outin December 2013.

Scotland
2014 A first bindingreferendum was held onSeptember 18, 2014, afterthe Edinburgh agreementwas signed on October15, 2012, by British PrimeMinister and Scottish FirstMinister.
Independence fromUK was rejected as aresult of an officialbinding referendumwith a 84.59% turnout.

It follows from the above comments that twocontradictory principles have been governing the UnitedNations toward secession claims: self-determination andstates’ territorial integrity. In the absence of a precedent orimmediate risk inside the EU when they were redacted,the European treaties do not dedicate a single line to in-ternal secession.

No explicit mention in the EU lawWithout any precedent or immediate risk when thesetexts were debated, the European treaties do not say aword about internal secessions. Of course, some EUmember states did experience a separation. It happenedwhen Algeria became independent from France in 1962.More recently, Greenland took its autonomy fromDenmark after a referendum in 2008. But none of thosenewly independent countries wanted to join the EuropeanUnion. Without any explicit mention of an internalsecession in the European treaties or relevant episode, wehave to seek the closest mention to that situation. That isprobably the article 4.2 from the Maastricht treaty asmodified by the Lisbon treaty, which reads as follows:

“The Union shall respect the equality of Member Statesbefore the Treaties as well as their national identities,inherent in their fundamental structures, political andconstitutional, inclusive of regional and local self-government. It shall respect their essential Statefunctions, including ensuring the territorial integrity ofthe State, maintaining law and order and safeguardingnational security. In particular, national security remainsthe sole responsibility of each Member State.”6

We may also add a mention to a custom in theinternational law: leaving a state which is a member ofan international organization implies to leave theorganization to which it belongs as well. The EuropeanCommission did not formally indicate what conduct theEU would adopt should a European region becomeindependent from a member state. However, RomanoProdi, as the president of the European Commission,declared in 2004 that a region leaving a member statewould leave simultaneously the European Union. Hissuccessors José Manuel Barroso and Jean-ClaudeJuncker confirmed that statement in several occasions.It implies that a new state would need the unanimous

agreement of the EU member states to join theorganization. Now, should Catalonia or Scotland becomeindependent states and applying to the European Union, itis unclear whether they would then follow a fast or a longtrack process to join the EU. What is clear is that theuncertainty does not deter pro-independence leaders frompublicly considering the EU membership as self-evident.7

However, none of the major pro-independence politicalforces in Scotland and Catalonia has promised an immedi-ate separation. The program for an independent Scotlandredacted on 18 September 2014, and referendum had setthe independence in March 2016 as a result of a negoti-ation with the central state, that is 18 months after the vote.Similarly, the Catalan pro-independence coalition Junts pelSí (together for the Yes) of the new president Carles Puig-demont also includes a proclamation of sovereignty within


18 months after his election, which took place on 10January 2016.Two main conditions seem necessary to favor an

international recognition. The first one is a negotiationwith the central State: It would certainly have taken placefor Scotland should the “Yes” have won, whereas nonegotiation ever took place between Catalonia and thecentral government. The second condition is a ratificationof the declaration of independence through a bindingreferendum. Catalonia has never organized any bindingreferendum on its independence.8 The 1 October 2017vote was prohibited by the Spanish justice and notrecognized by the international community. It came after asuccession of official demands from its Parliament to theSpanish Congress for a binding referendum in 2001, 2004,2012, and 2013 and again on 17 January and 18 September2014.9 Quite predictably, since the Spanish constitutiondoes not allow such a referendum and a strong majority ofthe Spanish MPs rejected it, the Spanish Congress turneddown those seven demands.Box 1 Brexit and the threat of Scottish independence

Despite their defeat in the 2014 binding independence referendum,the supporters of an independent Scotland declared to be pleased toget a surprisingly high 44.7% share of the votes, especially within thecontext of a high turnout of 84.6% of registered voters. Quitelogically, they did consider the possibility of a new Scottishreferendum and were comforted by a further electoral success of theScottish National Party (SNP) in the British general elections of 2015.A new vote on a Scottish independence seems more likely after the“Leave” option gained in the referendum on Brexit last June 23, 2016.Indeed, David Cameron himself warned in an interview given onJune 7, 2016, that the question of a Scottish referendum would beasked should the “Remain” option be clearly validated in Scotlandand rejected at state level. That condition is met: after the SNP didcampaign against the Brexit, the “Remain” option won with 62% ofthe vote in Scotland, whereas it lost with 48.1% of votes in the UK.That difference illustrates a stronger feeling of belonging to the EU inScotland than in the rest of the UK. The day after the Brexitreferendum, Scotland’s First Minister Nicola Sturgeon declared in apress conference that its result “created a significant change” sinceSeptember 18, 2014, adding that the option of a new referendum onindependence “was on the table”, since “it would be democraticallyunacceptable” to see Scotland being taken out of the EU against ourwill. Some scholars have argued that Scotland might take on the EUmembership of UK while the rest of UK would leave the EU. Othershave suggested to take the Kingdom of Denmark as an example(Hartmann 2017). Indeed, Denmark is part of the EU while the FaroeIslands and Greenland are not. Hartmann argues that, at least from alegal viewpoint, Scotland could establish a relationship with the EUafter Brexit similar to the special relation between the Faroes and the EU.

Since the international law cannot make it compulsoryfor a state to recognize another one and since the EU lawdoes not explicitly refer to internal secession, the politicaldecisions of parent states (Spain, UK, or the EU as a wholein the case of Brexit) shall be critical in shapingindependence outcomes. Genuine independence requires anegotiation with the central state, which is never obvious.Besides, obtaining a wide international recognition is not a

mere formality for a new state, even though the Europeanidentity of its citizens is beyond any doubt, as it is the casefor Scottish and Catalan people.We shall conclude by underlining that the decisions

made by the EU are often guided by pragmatism so thatone might expect a secessionist region (which wouldbecome a new state) to be granted the possibility ofenjoying a “fast track” to join again the EU. But itrequires good will from its member states.

The main drivers of breakouts of nations: aninsight into the economic theory of secessionsThe economic theory of secession considers that both thesize and the borders of nations result from the interplay ofcentripetal and centrifugal forces. The former are mainlydue to the benefits associated to a large population size,while the latter are mainly related to the fact that largecountries are likely to be more heterogeneous.10 In thisrespect, both the optimal size of a country and the optimalnumber of countries across the world can be defined as atrade-off between benefits of size and the costs of hetero-geneity. Optimal size must be understood as the size thatmaximizes the average welfare of individuals (Alesina andSpolaore, 2003, p. 11). Of course, nothing ensures thatexisting political institutions lead to this optimal size. Be-sides, whether countries are ruled by democraticallyelected politicians or by rent-maximizing dictators (Levia-thans) matters to explain how borders are set or redrawn.Put differently, autocratic and democratic regimes arelikely to lead to different outcomes regarding the countries’sizes as the objective of the rulers is not the same in each.This part is organized as follows. We study in the

“‘Internal exit’ and the size of nations when governmentsare non-democratic” section the decision to secede in aworld composed of autocratic (dictatorial) governments.Then, we move in the “Optimal size of countries in ademocratic setting” section to a world where borderredrawing is determined “democratically.” Some extensionsare presented in the “Some extensions aiming at makingtheory closer to the ‘real world’” section to assess therobustness of the main results presented in the “Optimalsize of countries in a democratic setting” section. Finally,we discuss in the “Fiscal decentralization, conflict, andsecession” section the links between decentralization andsecession as the former (together with regional transfers infavor of border regions) may be a way to compensateindividuals who live far from the center in peripheralregions.

“Internal exit” and the size of nations when governmentsare non-democraticBuchanan and Faith (1987) formalized secession as an“internal exit” from a given part of the population.Secession is an alternative to migration and the “voting


with one’s feet” mechanism à la Tiebout (1956). Thegovernment is represented as an elite or a sharingcoalition empowered to extract revenue from taxing therest of the population and provides “order” which is seenas a “nonexclusive, lumpy, and costly good.” This publicgood is financed through a proportional tax on income.The ability to secede corresponds to a participatoryconstraint of the governed (exploited). It establishes alimit on the government’s power to tax. The tax policycan become “accommodating” under a credible threat ofsecession. In Buchanan and Faith (1987), the trade-off de-termining potential secession is based on the scope ofeconomies of scale in public good provision, which favorscentralization, and the capability of expropriation fromthe government, which motivates secession. However, atthe equilibrium, secession never occurs because the threatof secession modifies the behavior of the sharing coalition,which makes ex post secession unnecessary.11 The mainresult is that the central government sets its tax rate so asto make the exploited just slightly better off by remainingin the federation rather than by separating (the exploitedearns no fiscal surplus).12

Following Buchanan and Faith’s approach, Berkowitz(1997) analyzes the impact of a peripheral region’s threat ofsecession in a centralized federation. The federalgovernment sets a tax rate while the peripheral region maydecide to secede. The originality of the model is that eachregion can pay a higher tax contribution to the federalgovernment in order to allow the latter to provide morepublic goods. Such a behavior has been observed inCzechoslovakia and in the USSR. This aims of course atmaintaining the unity of the federation and increasing thecost of secession for the peripheral regions. The authorconfirms the finding of Buchanan and Faith but only if the“exit option is sufficiently high.” Otherwise, and contrary toBuchanan and Faith, it may also be that the federalgovernment “over-pays” in order to keep the periphery inthe federation. The welfare of the peripheral region (whichearns a fiscal surplus) is then higher in the federation thanunder separation.Alesina and Spolaore (2003, p. 69 and following) provide

an interesting and intuitive discussion about the optimalnumber of countries when governments behave asLeviathans. Their starting point is that an unconstrainedLeviathan would maximize its rents by extracting resourcesfrom as large as possible a jurisdiction (which at the limitmight be the entire world). Obviously, this is not areasonable assumption since controlling a very largeterritory (an empire to use their terminology) also involvescosts. Indeed, the inhabitants of the regions situated at theboundaries of the empire are likely to have distinctpreferences that the central government mustaccommodate. Besides, even dictatorial regimes must takecare of the well-being part of their population to avoid

facing insurrection. It is straightforward to note that if theLeviathan governments can survive with the support of lessthan half of their population (which is generally the case),then the size of the countries will be larger and the numberof countries will be lower in autocratic than in democraticsettings (see below). Alesina and Spolaore (2003, p, 72) con-clude that “dictatorships are associated with inefficientlylarge countries, while democratization leads to break-ups ofempires and secessions”.

Optimal size of countries in a democratic settingWhile Buchanan and Faith (1987) consider the government(i.e., the sharing coalition) as given—corresponding to anoligarchy or a dictatorship setting—several authorsfollowing the seminal papers by Alesina and Spolaore(1997) and Bolton and Roland (1997) suppose that bothpolitical borders and economic policy outcomes aredetermined through majority voting. The previous trade-off, which determines the willingness to secede, is thenslightly modified. Basically, the centripetal forces, whichfavor centralization, remain the scale economies in thepublic good provision and the size of the national marketwhich determines the private income. In contrast, the maincentrifugal force, which pushes toward secession, is onceagain the heterogeneity of the population. However, in thisliterature, individuals, who are considered immobile, differover two dimensions: Their respective income and theirpreference for public goods.Alesina and Spolaore (1997)13 represent secession using

a spatial differentiation model à la Hotelling, which inducessome heterogeneity in individual preferences for the publicgood. The world consists in a line segment [0,1] alongwhich inhabitants are distributed uniformly. Countriescorrespond to a continuous subset of this segment.Political borders and country sizes are endogenouslydetermined. In each country, a public good is provided infixed quantity. Its location is determined through amajority vote. Applying the median voter theorem, andgiven the assumption of a uniform distribution ofindividuals,14 Alesina and Spolaore (1997) show that thepublic good will be provided at the center of the segmentrepresenting each country. Individuals have to bear atransportation cost to enjoy public consumption. This costincreases with the distance between their position(location) in the segment and the center. Such a cost mayalso be viewed as a disutility endured by individuals whenthey are located far away from the public good. The furtherthe inhabitants are from the center, the lower they valueconsumption of the public good. At the equilibrium,inhabitants at the borders are indifferent betweenbelonging to either one of the two adjacent countries.Secessions is associated with political fragmentation, whichreduces the average distance between inhabitants and thelocation of the public good. In other words, increasing the


number of countries reduces the disutility borne frompopulation heterogeneity. However, secessions involve acost, which derives from the existence of economies ofscale in the public good provision. As countries becomesmaller, the provision of public goods become costlier, buttheir relative quality improves, as in average the distance tothe public good decreases.The authors conclude that at the “democratic

equilibrium,” allowing secessions lead to an excessivepolitical fragmentation: The number of countries and theirrespective sizes, which are strictly equal given thatindividuals are uniformly distributed, do not correspond tothe optimal solution maximizing the world’s welfare. Thenumber of countries in the absence of side payments islarger and the size of countries smaller at the democraticequilibrium than the optimal ones. The intuition is thefollowing: Individuals who are far away from thegovernment pay as much as everyone else, but they do notenjoy the benefit of the public good as much as thoseindividuals who are located close to the government.Hence, their utility is lower than that of closer individuals.Put differently, as underlined by Alesina and Spolaore(2003, p. 44), “the voting equilibrium does not maximizeaverage utility but it does maximize the utility of theindividual living at the border”.15

Bolton and Roland (1997) propose a “positive” view ofthe trade-off determining secession, which lays emphasison income inequalities across regions rather than on dif-ferences in public good preferences. The centripetal forceis private income, which is higher if countries are large,16

while the centrifugal force is population’s heterogeneity.The model features two regions and population hetero-geneity is captured through the distribution of income inthe two regions. The authors consider exogenous bordersat the regional level. In each region, the individual incomeis distributed along a general17 continuous law. The aimof taxation is purely redistributive: A proportional incometax is raised at a rate decided through majority voting andthe publicly provided private good boils down to an equallump-sum transfer across individuals. Secession modifiesthe tax rate and lump sum transfer since the identity—theincome level—of the median voter changes.In Bolton and Roland (1997), secession results from the

tension between political proximity and economicefficiency (see Table 1). Secession improves on average thematch between public policy and individual preferencesfor redistribution at the regional level. However, secessionis costly as it reduces private income. Bolton and Roland’s(1997) approach allows one to consider not onlyindividual heterogeneity through the distribution ofincome but also regional disparities. Both the richer andthe poorer regions may want to secede for of courseopposite reasons: The majority in the richer region maysupport secession in order to pay less taxes and have less

redistribution while the majority in the poorer region maysupport secession to implement higher tax rates andredistribution. As in Buchanan and Faith (1987), Boltonand Roland (1997) study the conditions for secession-proof fiscal policy. Their main result is that “when thepreferences of political majorities across regions differsubstantially over the content of these policies, break-upmay be inevitable, even if it leads to efficiency losses be-cause of the political benefits of break-up to local major-ities” (Bolton and Roland 1997, p. 1084).

Some extensions aiming at making theory closer to the“real world”The models presented above ignored (or at least left aside)major questions that are nevertheless relevant in a more“positive” perspective of the secessionist phenomena andthat we analyze in the following.Globalization is intuitively a matter of interest for the

study of secessions. The relationship between economicintegration and political fragmentation has been largelystudied (see Casella 1994, 2001; Alesina and Spolaore,1997; Alesina et al. 2000). Economic integration mitigatesan advantage attributed to large countries, namely theirlarge market size. Indeed, in a globalized world, the size ofpolitical jurisdictions does not need to coincide with thesize of their market as trade is free across countries.Hence, economic integration across countries intended toreduce trade costs should also favor secession in thesecountries as the market potential of small-sized countrieswould be larger than their domestic size.18 It would bestraightforward to show formally that both the optimalnumber of countries (which maximizes the average utility)and the number of countries at democratic equilibriumare increasing with trade openness (note that the numberof countries in a Leviathan equilibrium also rises withtrade openness). One may go further and argue that therelationship between “smallness” and trade openness is re-inforcing each other as small countries need being moreintegrated in the world markets.It has been assumed so far that public goods were not

subject to interjurisdictional spill-overs, which seems tobe an “heroic” assumption. Ellingsen (1998) deals with theimpact of interjurisdictional externalities and free ridingon the decision for two regions to keep full sovereignty oralternatively form a union. Unification takes place if thereis a pro-union majority in each region. In each jurisdic-tion, the government provides a non-excludable publicgood that maximizes the utility of the majority. The“small” jurisdiction may free ride some non-excludablepublic goods provided by the large one. It is well knownthat the benefits of public goods provided by large andcentral jurisdictions may spill over into neighboringsmaller ones. The authors show that the small regiontends to oppose unification with the larger one and this is

Table 1 A simple model of secession

We consider a sequential game. In the first stage, the inhabitants of a region vote about the status of their region (independence versus status quo)a.In the second stage, they vote about the policy to adopt at the local or central levelb. The individuals have either different incomes or preferencesabout the public good. The first type of heterogeneity implies redistributive issues. The public good comes down to a lump-sum transfer, which canlead to redistributive conflicts between the individuals of a country. In this case, secession aims at reducing the level of regional inequalities (Boltonand Roland 1997). When the preferences over the public good are heterogeneous, secession modifies the quality of the public good (in terms ofgeographical location, individual preferences, etc.). By making the population more homogenous, it increases the average satisfaction of the voters-tax payers (Alesina and Spolaore 1997). Depending on the nature of the heterogeneity, the secession’s effect is quantitative or qualitative. However,these effects are not mutually exclusive. They can even be combined (see for instance Bolton and Roland 1996).Individuals consume both public goods and private goods, which are supposed to be perfect substitutesc. Moreover, the agents’ utilities are assumedto be additively separable. By nature, the public good is inevitable: No individual can avoid consuming or financing it. It can take the form of publicservices or government transfers. Individuals vote on a unique tax rate.Let Vi(·) be individual i’s utility:Vi : ℝþ � ℝþ � I↦ℝ

ci; g; qð Þ↦ci þ vi g; qð Þ:ci is individual i’s private consumption, which is equal to available income. It varies with i’s initial wealth (wi) and the constant tax rate (t). We have ci= (1 − t)wi. Individual income (wi) is initially exogenous and certain, and subsequently becomes random or even endogenous.g is the quantity of public good provided in the jurisdiction. It can be constant or endogenous, in which case it varies with the tax rate (t) and thetax base (Y)d: g = g(t,Y). We keep the general expression g.q, an n-tuple of (I)e, represents the quality of the public good. Following Hotelling and Lancaster, we assume that each individual has an ideal level ofpublic good. The function vi(g, q) of ℝ

+ × I in ℝrepresents the satisfaction of the individual i, consuming a quantity g of the public good of qualityq. All the authors cited assume implicitly that a change in the quality (q) does not change the cost of provision.The endogenous variable (s) (tm, gm, or qm) are chosen by majority vote. They correspond to the median preferences of the populationf. Individual i’sindirect utility, where the price t and the quantity g of the public good are taken into account, can be written asUi(tm, gm, qm;wi) = (1 − tm) ·wi + vi(gm, qm)We put an index s on the different variables after secession. Secession modifies the quantity and the quality of the public good. It also affects theindividual income: ws

i ≡ α wið Þ, with 0<α(wi)≤wi. Individual i’s utility becomesUsi tsm; g

sm; q

sm; α wið Þ� � ¼ 1−tsm

� � � α wið Þ þ vi gsm; qsm

� �

where tsm and qsm are determined by the vote of the secessionist population. Individual i wants independence iff it provides him a higher utility level.The utility difference can be written asΔ Ui ≡ Us

i tsm; gsm; q

sm; α wið Þ� �

−Ui tm; ; gm; ; qm; ;wið Þ;Δ Ui ¼ 1−tsm

� � � α wið Þ−wið Þ|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}

Eri

þ tm−tsm� �

wi þ vi gsm; qm

� �−vi gm; ; qmð Þ

|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}Efi

þ vi gsm; q

sm

� �−vi g

sm; qm

� �

|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}Epi

Independence has three effects: an income effect (Eri ), a fiscal effect (Efi ), and a political effect (Epi Þ:The first term, Eri , is the individual income loss. It is an immediate consequence of the hypothesis of a secession cost. We conclude that Eri ≤0 fromwi≥ α(wi).The tax effect, Efi , is a quantitative one. It can be decomposed into two terms. tm−tsm

� �wi evaluates the variation of tax rates. Its sign depends on the

presence of potential economies of scale in the production of the public good and the preferences of the new median voter. In general, thedecrease in the size of the country, and hence the tax base, implies an increase in the tax rate, i.e., tsm > tm . The second element, vi gsm; qm

� �−vi

gm; ; qm� �

, measures the variation of the quantity of the public good, given constant quality. Its sign depends on the joint evaluation of the tax base(Y) and the preferred tax rate (tsm and tm).The political effect, Epi , is qualitative. It results from the change in the identity of the political decision-maker in equilibrium. If the effect is positive, se-cession (or decentralization) makes policy-makers choose a public policy that is closer to the ideal policy of agent i.The following table summarizes the contributions of the two most important papers: Alesina and Spolaore (1997) and Bolton and Roland (1997). ForAlesina and Spolaore (1997), political borders are determined by a trade-off between the tax effect and the political effect. For Bolton and Roland(1997), the trade-off is between the income effect and the fiscal effect. For the former, secession has a purely allocative goal by moving the local pub-lic goods closer to the individuals that finances it. In contrast, the latter emphasize the redistributive effect resulting from a political separation.

Alesina and Spolaore (1997) Bolton and Roland (1997)

Political borders endogenous exogenous

Nature of heterogeneity assessment of public good income

Eri 0 (α − 1)wi < 0

Efi (t − ts)w < 0 t−αst� �

wi þ gs−g≷0

Epi a.g. qi−qsi

� �≷0 0

aThis simple model is drawn and translated from Rota-Graziosi (2004)bThis can require several votescThe complementarity of private and public goods is not explicitly covered in this literature review (c. f. Casella (1994 and 2001); Casella and Feinstein (2002))dWith Y ¼ R �w

w wih wið Þdwi , where h(·) is the income distribution in the jurisdiction on the support ½w ; �w �eq = (q1, q2,…, qn), where qi represents the characteristic i of the public good. (I) is a set of dimension n that gathers all the possible values of the n characteristicsof the public good. Given the conditions on the application of the median voter theorem, the set (I) is often reduced to a single dimension, for example thegeographic locationfIf the preference space is multidimensional, it is usually difficult to determine the median quality. We assume that each characteristic of the public good isdecided upon by vote. However, given this assumption, the results vary depending on the agenda of the votes. The models considered in this literature review donot exceed two-dimensionality



robust to different specifications of tastes for the publicgood. The corollary of this result is that free riding fromlarger neighbors is an additional factor pushing small re-gions to secede.The introduction of strategic voting behavior in the

economic theory of secession also leads us to considerstrategic delegation by the median voter toward arepresentative who has not the same preferences as him(her) in terms of public spending.19 In this line, Gradstein(2004) considers the secession option in a Coasianbargaining between two regions that are members of afederation. The author highlights that secession or uniondecision involves a strategic delegation issue. Throughstrategic delegation, the median voter of each region triesto reduce her own contribution in order to push theothers to support a larger share of the tax burden tofinance the federal public good. This behavior leads to aninefficient allocation of resources in the federation, whichmay be “unattractive” for the minority region. Indeed, ineach region, the electorate chooses a representative whohas a lower preference for public goods than the generalpopulation. Such a move is a commitment (à la Schelling),which aims to improve regions’ bargaining power indetermining the package of tax rate and public goodprovision. Limiting the secessionist tendencies byimposing a referendum at the regional level instead ofallowing the representative to decide alone would restoreefficiency.Finally, risk and information asymmetry can be

introduced in the economic analysis of secession.Typically, political union allows to some extent riskpooling, which reduces individuals’ incomeuncertainty. However, risk pooling may also generatea well-known moral hazard problem since regionsmay have less incentives to implement policies thatdecrease national risk. Van Hagen and Eichengreen(1996) analyze such a trade-off between risk poolingand moral hazard behavior in the case of the Euro-pean Union. Another trade-off related to uncertaintyis the one studied by Persson and Tabellini (1996).The latter consider two kinds of risk that each indi-vidual is facing: An economic risk and a politicalrisk. The former is a centripetal force since some in-surance (risk pooling) is possible across the regionsof the same country. The latter derives from the di-versity of voters in a large union. This leads to un-certainty about the median voter’s income and thenthe public policy that is eventually chosen. Politicaluncertainty increases with the size of the countryand constitutes the main centrifugal (secessionist)force. Secession mitigates political uncertainty in re-ducing discrepancies between voters. However, itcomes at the expense of the inter-regional insurancemechanism.

Fiscal decentralization, conflict, and secessionSecession can be seen as an extreme case of decentralization,when all the prerogatives of the State (tax and spending) aretransferred to the local political unit. The literature on fiscalfederalism has largely debated the (in) efficiency ofdecentralization (see Martinez-Vazquez et al. (2016) for asurvey). All the previous mechanisms determining the occur-rence of secession are also at play when it comes to definethe “optimal” architecture of the state. On the spending side,some public goods may be locally delivered to better matchpopulations’ preferences while others should remain suppliedcentrally to avoid duplication costs or the loss of scale econ-omies (Oates 1972). On the revenue side, granting subna-tional governments with more autonomy is expected toimprove the accountability of local officials, but it would alsoinduce a risk of harmful tax competition named “race to thebottom” (see the seminal paper by Zodrow and Mieszkovski1986).Panizza (1999) develops a model where individuals

consume a private good and two public goods: A nationalpublic good (defense) which is subject to economies ofscale (its average cost is decreasing with the country’s size)and a local public good (education). Education is providedby both the central government and subnational units.Individuals prefer local public goods that are provided bysubnational jurisdictions (as it fits their preferences best) topublic goods provided by the central government.Decisions over the public goods are made according to thepreferences of the median voter in the respectivejurisdictions. All things being equal, the moredecentralized the country is (i.e., the higher the share ofeducation that is locally provided), the higher is the utilityof individuals. However, subnational jurisdictions are lessefficient at providing the national public good (defense),and there is thus a trade-off between quality of match be-tween preferences and the provision of the local publicgood (highest in decentralization) and the cost of providingthe national public good (also highest in decentralization).Subnational jurisdictions will decide to secede if the utilityenjoyed by the regional median voter by locally providingthe local public good (education) outweighs the disutilityresulting from a higher cost of providing the national pub-lic good (whose financing is not shared any longer with theother jurisdictions in case of secession).20

Provided that the central government wants to avoidsecession by all means, it will choose an equilibriumlevel of decentralization which conveys the same utilityto individuals that they would enjoy with secession.Then, decentralization substitutes for separation, andunsurprisingly, the more heterogeneous the country iswith respect to tastes for education, the moredecentralized it will be. Arzaghi and Henderson (2005)obtain the same kind of results using a two regionsmodel where the central region never claims for


separation (greater autonomy) while the peripheralregion may do so as its population endures a loss ofutility in a unitary structure due to spatial decay.Spatial decay refers to the fact that public goodsupplied by a central government may not fully reachdistant minorities because of the difficulty to monitorthe delivery of the public good over long distance andof the inadequacy of one-size-fits-all provision in theface of local specificities. Then, the level of local publicgood available to individuals in the peripheral regionturns out to be lower than in the central region.In the case of a unitary country, the government is

assumed to be located in the center where the medianvoter also is. There is no real secession in this modelas separation means that the country shifts from aunitary structure (where the central government setsthe same tax rate and the same level of provision oflocal public good across the country) to a federalarrangement. Spatial decay vanishes in a federalsystem since each region has to provide and financethe local public good for its own constituents only. Onthe other hand, the demand for greater autonomy willalso depend on the cost of running a new governmentfor the peripheral region. Spolaore (2010) also arguesthat decentralization reduces the cost of heterogeneityand then reduces incentives to secede (centripetaleffect). However, decentralization has also acentrifugal effect when it allows the secessionistregions to get access to additional resources at theexpense of the central government (the odd of successof separation depends on the conflict capabilities ofthe central government and the peripheral region).Spolaore (2010) shows that if the country is highlycentralized (above a given threshold which depends onthe parameters of the model), then decentralization islikely to foster separation while a decentralizedcountry will take advantage of decentralizing more toprevent secession.2122

Empirical evidence about the determinants ofsecessions and the means to deter borderredrawingIn the first part of this section, we aim to review theempirical determinants of secessions and compare theseto theoretical predictions. In the second part, we willexplore whether federalism and decentralization arelikely to deter separatist claims when countries are veryethnically heterogeneous.

The main determinants of separation claimsThe theoretical literature suggests that inhabitants of agiven region will prefer staying part of a larger country(or a union) when the associated net benefits of thestatus quo outweigh the net benefits of separation. The

theoretical discussion in the “The main drivers ofbreakouts of nations: an insight into the economictheory of secessions” section highlighted a key trade-offbetween two forces: increasing returns to scale in theprovision of public goods, on the one hand, and culturaland preference heterogeneity across individuals living indifferent regions, on the other hand. The former forcediscourages regions to secede, to take advantage of theeconomic benefits induced by large country size.23 Thelatter force encourages regional breakup as it is difficultfor large and heterogeneous countries to have their pol-icies match with the preferences of everyone, especiallyregional groups.It is worth noting that the aforementioned trade-off is

similar to the one put forward by the fiscal federalism litera-ture to define the optimal degree of fiscal decentralization(Oates 1972). In both cases, there is a trade-off between thepresence of economies of scale in the provision of publicgoods and heterogeneity of preferences. Panizza (1999) ar-gues that the devolution of power by central governmentsto subnational governments is a way to preserve territorialintegrity of the country when secessionist claims are cred-ible. Arzaghi and Henderson (2005) explicitly model re-gional demands for decentralization drawing upon theliterature on secessions. Separation in their model not onlymeans a shift from a “strong unitary system to a strong fed-eral system” but also leads to a situation where regionalgovernments have full discretion to provide public goodsand no public goods are provided by the central govern-ment any longer, which eventually comes down toseparation.Drawing from both the literature on secession and fiscal

decentralization leads us to focus on three coreassumptions: H1: Large regions will display moresecessionist tendencies than smaller ones. This is becauselarge regions would form a country that can still benefitfrom scale economies in the provision of public goods.H2a: Regions richer than the average of the existingcountry will be more likely to exhibit secessionisttendencies than poorer regions. This is because richerregions usually are net contributors to fiscal equalizationschemes. Richer regions would also form independentcountries that are more viable economically. H2b: Regionswill display more secessionist tendencies as the countrybecomes richer. There are fixed costs involved with theprocess of separation (e.g., setting-up an administration),so higher income makes these costs affordable. H3a: Re-gions which are culturally distant from the rest of thecountry will display more secessionist tendencies. This isbecause their preferences may be quite far from those ofother regions and groups. Thus, policies tailored for themedian voter in the country may not differ from minoritygroups’ preferences. H3b: Countries with large and diversepopulations will be more prone to secessionist demands


than smaller, more homogenous countries. This is becauseit is more challenging for a central government to accom-modate heterogeneity of preferences across the territory.A first set of papers does not explicitly deal with the

determinants of secession but rather aims at explainingthe optimal level of centralization (resp. decentralization).As argued above, these results are of interest to help usunderstand why some regions decide to separate. Panizza(1999) conducts a cross-sectional analysis on a sample of55 countries and finds that the central government’s shareof revenues (used as a measure of fiscal centralization) sig-nificantly decreases with the size of countries, per capitaincome levels, and their degree of ethnic fragmentation(although the latter effect is less robust). Using similardata, Arzaghi and Henderson (2005) find that federalismis more likely in rich and large countries. They also findthat fiscal decentralization is positively associated with thesize of countries, both in terms of population and area.However, no association can be drawn from the data be-tween ethnic heterogeneity and decentralization. Samba-nis and Milanovic (2014) conduct a similar study on self-determination movements in 48 decentralized countriesand 876 regions over the period 1945–2012. They expli-citly assume that regions that enjoy a status of autonomymust have expressed secessionist will (as central govern-ments are unlikely to grant territorial autonomy other-wise). The share of regional public expenditures that isfinanced from the regions’ own resources is used a proxyof autonomy.24 They confirm that richer and morepopulous regions are more likely to express sovereigntydemands than poorer and smaller regions. Moreover, re-gions with natural resources (oil and minerals) are alsomore likely to be autonomous.25 However, they do not findan obvious relationship between the ethnic distinctivenessof regions and their likelihood of being autonomous.Wimmer et al. (2009) use the Ethnic Power Relations

(EPR) dataset to explain secessionist claims of ethnicgroups in all countries of the world from World War II to2005. They show that secessionist wars are more likely tobreak out for those ethnic groups which are excluded fromparticipation in central state power, which had an imperialpast and a long-standing history of indirect rule (a largepart of the population is not used to be governed and to re-port to the political center), and which live in large coun-tries with high levels of linguistic fractionalization.Wimmer et al. (2009) is not informative on the determi-nants of secessionist demands themselves. Whether seces-sionist demands lead to civil war or not may itself dependupon the same range of factors. Cunningham (2013) dir-ectly investigates why some self-determination movementsturn violent, whereas some others lead to non-violent pro-test and others yet remain within the confines of conven-tional politics. Interestingly, she finds that violence is morelikely to occur over conventional politics when the groups

that demand self-determination are large, have kin in adja-cent states, are excluded from political power, are econom-ically discriminated, and are relatively poor. Apart from thislast variable, these results are consistent with Wimmeret al.’s (2009), and so the findings on secessionist conflictscan be considered informative on underlying demands forseparation.26 This is further confirmed by Sorens (2005)who focuses on non-violent avenues to separation. Heshows that the vote share of secessionist parties in ad-vanced democracies increases in regions where a distinctlanguage is dominant, which are geographically removedfrom the political center, with a history of independence,and which concentrate a high share of the country’s popula-tion and GDP. Empirical findings appear to be largely con-sistent and in line with theoretical predictions.Another strand of the literature aims at estimating the

trade-off between economies of scale and cultural hetero-geneity. This offers a direct test of theoretical predictions.Desmet et al. (2011) estimate such a trade-off by calibrat-ing a structural model that predicts the likelihood that aregion prefers to remain part of a country (or, alterna-tively, prefers independence). By the same token, themodel allows the researchers to study under which condi-tions countries may cooperate with each other or evenunite. In the model, the world is composed of countries,which themselves are divided into regions in which agentslive. The latter are immobile and have different incomes.They vote on the optimal level of a public good which isproduced under increasing returns to scale. Utility derivedfrom the consumption of the public goods is supposed todecrease with the cultural heterogeneity of the country(homogeneity is supposed within regions). The tax rate ineach country is chosen by majority voting. Secession mayoccur unilaterally or require the majority of each regionaffected by the separation process. The model is calibratedby assuming that the current European map is stable. Thekey variables of the model are economic development(GDP per capita), population size, and a parameter sum-ming up the cost of cultural heterogeneity (proxied bygenetic heterogeneity).Their results are the following: (i) The Basque country

and Scotland are the regions that are the most likely tosecede (which interestingly is consistent with the realsituation of these two regions); (ii) unsurprisingly,countries which are quite similar in terms of culture,population, and GDP are the most likely to unite. Thiswould be more specifically the case of Switzerland andAustria, Denmark and Norway, or Belgium andNetherlands; (iii) separatist claims can be contained evenwithin highly unequal unions as long as culturaldifferences are either limited or are not negatively valuedby the population; and (iv) ex-Yugoslavia is a good labora-tory to test for some predictions of the model. Based onpre-war levels of GDP per capita and cultural distance in


the ex-Yugoslavia, the authors observe that for reasonablevalues of the cost of heterogeneity, Slovenia would havehad a small gain of leaving the union. This was due toSlovenia being by far the richest country of the Yugoslavrepublics (at that time, it was twice as rich as the secondrichest one, i.e., Croatia). Once they allow Slovenia toleave the union, their model now predicts that Croatia toohas an interest in seceding. This is logical as the unionminus Slovenia brings less benefits to the other constitu-ents and Croatia would now be the richest republic (it alsowas twice as rich as the remaining four constituencies).After both Slovenia and Croatia leave, the model predictsthat the process of disintegration can either stop (if thecost of heterogeneity is low) or continue further (if thecost of heterogeneity is high). In the latter case, Bosniaand then Macedonia would eventually secede, leavingYugoslavia restricted to its republics of Serbia andMontenegro.This fits quite well with the historical events. Indeed,

Bosnia, Croatia, Slovenia, and Macedonia have all seceded in1991 or 1992. Montenegro, which is the least likely to quitthe union in the model, only declared independence in 2006.Interestingly, the calibration of Desmet et al. (2011) foundthat the complete breakup of Yugoslavia was a relativelylikely event. Of all the countries and regions of Europe, themost likely secessions were to be found in the ex-Yugoslavia.This was largely due to the large economic differences thatexisted in this union. Cultural differences, in contrast, werequite modest (on average genetic distances were no higherthan, say, between England and Scotland) so that the key forthe process of disintegration to unfold was that these differ-ences mattered a lot to the people (in a negative way).It is interesting to conclude this section to get insight

into the economic impact of independence. Reynaerts andVanschoonbeek (2016) compare the economic growthtrajectory of newly independent countries to the growthtrajectory of a synthetic control group representing whatwould have happened in the post-independence period, hadthe secession not occurred. They show that independencegenerates long-term economic costs as the newly independ-ent countries tend to experience a lower rate of economicgrowth than they would have experienced had theyremained in the union. As a result, GDP per capita in newlyindependent countries is 20% lower, on average, than whatit would have been without separation. This is consistentwith the view that smaller constituencies are less efficienteconomically. For a region, breaking-up from large politiescarries an economic cost which individuals may neverthe-less be willing to bear if they value cultural heterogeneityvery negatively. Reynaerts and Vanschoonbeek (2016) alsoshow that the cost of independence increases with the sizeof the country (likely due to reduction in scale economies)but that this cost can be partly mitigated by heightenedopenness to trade of the new entity.

Decentralization: a means to accommodate ethnicdiversity and deter secessionist conflicts?Most central governments dislike granting autonomy, letalone independence, to specific ethnic groups for fear ofcontagion to other groups and loss of territorial integrity(Walter 2006). Demands for sovereignty are thuscommonly met with resistance, which can lead toviolence. For instance, Sambanis and Milanovic (2014)found that out of 221 regions enjoying some degree ofautonomy in their sample, 46 experienced violentrelations with the central government. There is a strongpresumption that conflicts over territories are difficult tosolve peacefully as it is not always practical to divideterritories across actors. Disputes are especiallyintractable when territories are imbued with symbolic orstrategic values, such as access to sea, mining locations,or military bases (Toft, 2003). Fearon and Laitin (1999)find, for instance, that territorially concentratedminorities are far more likely to experience large-scaleviolence than other groups. It is therefore not surprisingthat about half of all reported ethnic civil wars that oc-curred since 1945 were secessionist wars (Wimmer et al.2009).27 Conversely, Wimmer et al. (2009) found thatnearly all secessionist wars in their sample were ethnicin nature (only 3 out of 60 were not). It is important tostress that ethnicity is not viewed here in the common,narrow sense of the word. Scholars since at least Horo-witz (1985) use a very broad definition of ethnicity thatapplies to groups based on mostly hereditary traits (or“ascriptive” traits) that include language, tribe, religion,nationalities, and even castes (see Chandra 2004 for adiscussion of the different definitions). The followingdiscussion should therefore not be seen as solely con-fined to narrowly defined ethnic conflicts.28

To manage “territorial” cleavages and preventsecessions, decentralization can be an appealing solution.It allows central governments to grant some degree ofautonomy and decision power to regions or ethnic groupsthat wish to secede, without loss of sovereignty. Manyscholars have advocated decentralization for that reason(e.g., Lijphart 1977; Nordquist 1998; Hechter 2000;Bermeo 2002; Hooghe 2004; Gurr 1994). In contrast,opponents point out that decentralization in multi-ethniccountries contributes to “freeze” ethnic identities overtime (Hardgrave 1993, Kymlicka 1998) and to reinforcethe legitimacy of ethnically defined subunits (Cornell2002). Moreover, decentralization provides new institu-tional and economic resources to the separatist move-ments through the regional governments. Thus,decentralization may well foster—and not prevent—vio-lent conflicts (Cornell 2002, Roeder 1991, Bunce 1999,Snyder 2000). Ethno-federalism, which refers to a situ-ation where regions are crafted to grant ethnic groupscontrol of regional government, has notably been blamed


for secessionist tendencies in the ex-Soviet Union and ex-Yugoslavia (e.g., Roeder 1991, Bunce 1999; Cornell 2002)and for the failure to contain ethnic violence in Nigeria(Suberu 2001). Hale (2004) argues that ethno-federal ar-rangements in which a specific region is dominant aredestabilizing.The empirical literature on decentralization and conflict

has grown since the 1990s. A strand of this literature usesethnic groups as the unit of analysis, mostly through the“Minorities At Risk” (MAR) and Ethno-Power Relations(EPR) databases.29 Cohen (1997) finds that federalism isassociated with less rebellion but more protest, perhaps in-dicative that with decentralization, conflicts shift from thecenter (where stakes are high) to the local level (wherestakes are lower). Likewise, the estimations of Saidemanet al. (2002) suggest that federalism reduces ethnic rebel-lion. These studies suffer, however, from endogeneity issue.As we have seen, decentralization is likely to be explainedby conflict as much as the other way around. Results fromsimple pooled analyses should thus be taken with caution.Studies by Tranchant (2008, 2016), Christin and Hug(2012), and Cederman et al. (2015) attempt to address theendogeneity with quasi-experimental methods.Tranchant (2008) looks at fiscal decentralization, which

is captured by the share of subnational expenditures ingeneral government spending collected by theInternational Monetary Fund. Results on 50 ethnic groupsbetween 1985 and 2001 show that fiscal decentralizationconsistently reduces ethnic rebellion and intergroupviolence. The positive (i.e., in the sense of conflictmitigating) impact of decentralization is maximized incountries with high GDP per capita.30 Cederman et al.(2015) and Tranchant (2016) use the Ethno-Power Rela-tions (EPR) dataset on all 800 politically relevant ethnicgroups worldwide and find that territorial autonomy andfiscal decentralization, respectively, tend to reduce ethniccivil wars. Both explicitly deal with endogeneity (throughinstrumental variables and difference-GMM estimators).Another strand of the literature resorts to cross-

country analyses, pooling together information on allethnic groups within a country. This obscures criticalheterogeneity (for instance, the protracted armed con-flict in Aceh involved a region which makes up less than2% of Indonesian population), but it avoids sample selec-tion bias issues.31 Among country-level studies, three es-pecially important ones are Bakke and Wibbels (2006),Brancati (2006), and Christin and Hug (2012). Bakkeand Wibbels (2006) focus on 22 federal or semi-federalstates between 1978 and 2000 and consider (amongothers) how regional inequalities and fiscal transfersacross regions mediate the impact of federalism on civilwars (based on the Armed Conflict Dataset) and on eth-nic rebellion and protest (both based on MAR). Theyfind that federalism in the context of large regional

inequalities contributes to ethnic rebellion and protestbut that fiscal transfers to regionally concentrated ethnicgroups detracts from armed conflict. Brancati (2006) fo-cuses on 30 democratic states and investigates the directand indirect effects of political decentralization. Directeffects are hypothesized to operate following thepreference-matching mechanism described above. Indir-ect effects of decentralization are assumed to be negativeand to operate through the strength of regional parties.The argument of Brancati (2006) is that decentralizationallows regional parties to strive as it gives them oppor-tunities to win elections and influence policy. Insofar asstrong regional parties contribute to freezing and legit-imating ethnic identities, they also favor secessionismand conflict. Using unique data on regional parties andMAR data on ethnic violence (aggregated at countrylevel), Brancati (2006) shows that both direct and indir-ect effects are statistically significant and have the ex-pected signs. The net effect of decentralization is thenpeace preserving if decentralization is not accompaniedwith rising strength of regional parties and conflict pro-ductive otherwise. Christin and Hug (2012) find thatcountries with a strong ethno-federal structure (i.e.,where minorities control a large share of subfederalunits) such as Nigeria or Brazil are the most prone toexperience an onset of ethnic conflicts. This is also con-sistent with the view expressed by Horowitz (1985) thatfederalism along ethnic lines is destabilizing.

ConclusionWe have seen that economists predict secessions wheneconomies of scale are relatively unimportant and thecost of population heterogeneity is high. Smalleconomies of scale mean that newly formed countrieswill not suffer much from their smaller size whenproviding public goods. High costs of populationheterogeneity mean that newly independent countrieswill benefit from a greater social cohesion. Secessionistclaims are also predicted to be more likely from richer-than-average regions, which subsidize the rest of thecountry. The patterns of secessionist demands analyzedin the empirical literature seem largely consistent withthis economic reasoning. Regions that have the least tolose from breaking-up from a union, and which are mostlikely to succeed economically on their own, are themost likely to express secessionist tendencies. However,the desire of self-rule cannot be explained solely by anarrow economic calculus. In fact, we have seen that in-dividuals in newly independent countries bear a largeeconomic penalty from the secession (equivalent toabout 20% of the GDP per capita level). We have alsoseen that economic differences alone would probablynot have sufficed for the ex-Yugoslavia’s disintegrationprocess to happen. This shows that self-rule may offer


intrinsic value to individuals, especially for members ofculturally distinct groups.Legally speaking, the international law promotes two

seemingly contradicting rights regarding secession: Aright of self-determination and a principle of states’territorial integrity. In some occasions, the inter-national community considered that the first principledominated the second and accepted separations as alegitimate outcome. This was the case of thedecolonization process and for the separation of EastTimor (1999), Bougainville (2001), or South Sudan(2001). A history of discriminations and free and fairbinding self-determination referendums seem to be anecessary—but not sufficient—condition for the inter-national community to recognize newly created states.Within the EU, no formal stance has been taken re-garding secessions of member states or from withinmember states, so that outcomes of secessionist de-mands will critically hinge on political decisions bymember states.We have also seen that countries that are large, diverse,

and regionally unequal are especially likely to resort todecentralization, largely in a bid to contain secessionistdemands. Empirical studies largely agree that federal anddecentralized arrangements can successfully containcentrifugal forces, under certain conditions. Federalsystems in which regional borders closely coincide withthe distribution of ethnic groups, for instance, are likely tobe unstable, especially when one region is dominant.However, the granting of regional autonomy status and/orthe devolution of substantial spending and taxationpowers to subnational governments are associated withfewer ethnic conflicts, especially in democratic and richcountries. There is still a question mark as to theeffectiveness and desirability of these institutional devisein poor and/or fragile countries.

Endnotes1In the following lines, we will define a nation-state by

three principles: sovereignty understood as the supremepower to express the general will (Rousseau 2014), inde-pendence in the management of their internal affairs,and mutual recognition. That definition implies thatnation-states conserve a key role in self-determinationprocesses.

2The full text of 1514 Resolution can be downloaded at theURL: http://www.sfu.ca/~palys/UN-Resolution%201514.pdf.

3United Nations Declaration on the right of indigenouspeoples, http://www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf.

4Roethke (2011, p. 38) underlines that “some scholarsargue that territorial integrity merely safeguards theinviolability of international borders but does notregulate an internal affair such as secession”.

5Sources:Amaël Cattaruzza, “Les référendumsd’autodétermination: démocratisation ou balkanisation dumonde?”, L’Espace Politique [Online], 3 | 2007-3, posted on22 December 2007, URL: http://espacepolitique.revues.org/914- BBC, “Scotland decides”, page on the Scottish referen-dum on independence held on 18 September 2014, [Online],URL http://www.bbc.com/news/events/scotland-decides/re-sults- Fondation Robert Schuman, Corinne Deloy, “Aftertwenty four years of union with Serbia, Montenegro is inde-pendent again”, 22 May 2006, [Online], URL http://www.ro-bert-schuman.eu/en/eem/0522-after-twenty-four-years-of-union-with-serbia-montenegro-is-independent-again- Inter-national Crisis Group “ Indonesia: history lessons”, 11 April2013, [Online], URL https://www.crisisgroup.org/asia/south-east-asia/indonesia/history-lessons- Vincent Laborderie,Nicolas Parent (Dir), 2012, Good morning Belgium, EditionsMols, Brussels, 210 p.- Sonia Le Gouriellec, “Trois trajec-toires de sécession dans la Corne de l’Afrique: le Somaliland,l’Érythrée, le Soudan du Sud”, Sécurité globale, 2011/4 (N°18), p. 95-106.- Stéphane Rosière, “La fragmentation del’espace étatique mondial”, L’Espace Politique [Online], 11 |2010-2, posted on 18 November 2010, URL: http://espace-politique.revues.org/1608- Southern Sudan Referendum2011, official results validated by the Southern Sudan Refer-endum Commission, [Online], http://southernsudan2011.-com/- David Torrance, 2013, The Battle for Britain.Scotland and the Independence Referendum, Biteback Pub-lishing, London, 370 p.

6EU Lisbon treaty in the official EU website: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A12012M%2FTXT.

7This uncertainty has also been a strategic device todeter secession by the anti-independence leaders.

8The Catalan regional elections of 27 September 2015were interpreted as a referendum by the autonomousgovernment. The elections were marked by anunprecedented turnout of 77.44%. Indeed, in Catalonia,regional elections usually have a lower turnout thangeneral elections since a part of the registered voters feelmore involved in the latter than in the former. Theprevious Catalan regional elections of 25 November2012 were marked by a 67.76% turnout, which wasalready high. Afterwards, the unofficial and unbindingconsultation on the independence of Cataloniaorganized on 9 November 2014 obtained 2.34 millionvoters while the regional elections of 27 September 2015mobilized 4.11 million voters on a 7.5 million peoplepopulation. That unprecedented mobilization could beobserved on any geographical scale. We may comparethe electoral mobilization in Catalonia to the bindingreferendum on the Scottish independence last 18September 2014 and its turnout of 84.6%.

9Congreso de los Diputados: http://www.congreso.es/portal/page/portal/Congreso/Congreso/Iniciativas

http://www.sfu.ca/~palys/UN-Resolution%201514.pdf

http://www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf

http://www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf

http://espacepolitique.revues.org/914


http://www.bbc.com/news/events/scotland-decides/results

http://www.bbc.com/news/events/scotland-decides/results

http://www.robert-schuman.eu/en/eem/0522-after-twenty-four-years-of-union-with-serbia-montenegro-is-independent-again



https://www.crisisgroup.org/asia/south-east-asia/indonesia/history-lessons

https://www.crisisgroup.org/asia/south-east-asia/indonesia/history-lessons



http://southernsudan2011.com/

http://southernsudan2011.com/

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A12012M%2FTXT



http://www.congreso.es/portal/page/portal/Congreso/Congreso/Iniciativas

http://www.congreso.es/portal/page/portal/Congreso/Congreso/Iniciativas


10According to Alesina and Spolaore (2003, p. 3–4),benefits enjoyed by large sized countries are the following:(i) The cost of providing certain public goods isdecreasing with the number of people and tax payers (thisis especially true for pure public goods such as defenseand security), (ii) large countries can raise more resourcesand better defend their frontiers, and (iii) large countriesare generally richer than smaller ones because they havelarger markets and may take advantage of a “home marketeffect” as shown by the new economic geographyliterature. Furthermore, the “home market effect” is one ofthe main drivers of the agglomeration processes; (iv) largecountries often provide “insurance” to the regions that areharmed by economic downturns or natural calamities.

11The equilibrium is said to be secession-proof. Asymmetric notion of coalition-proofness Nash equilib-rium has been studied in game theory by Bernheim et al.(1987), among others.

12Rota-Graziosi (2007) emphasizes that a privateincome effect has also to be considered in Buchanan andFaith (1987) framework, since income is an increasingfunction of the size of the market (which perfectlymatches the size of the jurisdiction). This private incomeeffect favors centralization or equivalently reduces thethreat of secession and increases the government’scapacity of exploitation.

13We present these papers in the order as they appearin the same issue of the Quarterly Journal of Economics(see references at the end of the paper).

14A uniform distribution is symmetric: which meansthat its median and its mean are identical.

15The result of Alesina and Spolaore (1997) is howeververy sensitive to several assumptions, in particular thefixed cost of public goods with respect to the unitarytransportation cost.

16By assumption, secession reduces the size of thedomestic market and consequently individual privateincome. Indeed, the authors assume some efficiencylosses with secession given that “any allocation that isachieved under separation can be replicated in theunified nation by introducing the same degree ofdecentralization as under separation.”

17The income distribution, which will determine thepreference for public policy, is not here systematicallysymmetric.

18It is noteworthy that an implicit assumption madeby the seminal papers presented above is that thesuccessor countries would enjoy the same access to theworldwide market than the initial State.

19Such sophisticated voting behaviors were consideredneither by Alesina and Spolaore (1997) nor by Boltonand Roland (1997).

20See in the empirical part below Desmet et al. (2011)who calibrate a structural model for the EU.

21Flamand (2015) uses mostly the same ingredients asthe previous literature and develops a model à laAlesina and Spolaore (1997) where income inequalitiesand cultural heterogeneity play an important role.Under “full unification,” the rich region is the one thatis prone to secede as it implicitly finances transfers tothe poor region. The outcome will ultimately dependon the stakes at play for the rich region on the onehand and the poor region on the other hand. Putdifferently, whether “full union” or secession occurs atequilibrium rests on how much of their resources bothregions are willing to put in the conflict to defend theirown interests, which ultimately depends in the modelon whether “full union” or secession is the sociallyefficient outcome. The author obtains mixed results asto whether fiscal decentralization may prevent wastefulsecessionist conflicts. More specifically, it is shown thatpartial fiscal decentralization (which lies between theextreme cases of full unification and secession) may besuccessful to mitigate conflicts if the cost of diversitydecreases proportionally with the level ofdecentralization and decentralization is a reversibleprocess (should the later condition not been fulfilled,the rich region would be incited to spark a conflict inorder to force secession once decentralization has beenimplemented). Finally, this issue should be addressthrough empirics: Does decentralization tame or fuelpro-independence impulses?

22Le Breton and Weber (2003) examine redistributivetransfers from central to local governments to preventsecessions by the latter. They determine the structure ofequalization transfers named partial equalization, whichdeter secession from disadvantaged and advantagedregions. Haimanko et al. (2004) extend the analysis ofthe trade-off between increasing return to scale and in-dividual heterogeneity by combining both a game theoryand operational research. They study the efficiency andthe sustainability of population’s partition into several ju-risdictions. Efficiency consists in minimizing total cost,while sustainability relies on secession-proof equilib-riums. The authors establish that any efficient partitionis sustainable in a unidimensional policy space. Drèzeet al. (2008) highlight that this result does not hold in atwo-dimensional policy space. They define the notion ofδ-secession-proof allocation, where δ is the fraction ofjurisdiction’s public good that is externally financed. Thisexternal transfer, which may be tiny but account for atleast 0.2% of the total cost, is sufficient to ensure the sta-bility of the partition.

23Conversely, economies of scale mean that smallnewly independent countries would face high economiccosts.

24The authors use indistinctly the terms of autonomy,sovereignty, and self-determination.


25Although this result seems intuitive, Perez-Sebastianand Raveh (2014) argue that economies dominated by nat-ural resources are vulnerable to volatility of resource pricesand to Dutch disease whereby periods of increase in pricestranslate into higher wages and general price levels in theeconomy, reducing competitiveness of the economy as awhole. Individuals in regions rich in natural resources maytherefore prefer to remain in a union in order to pool thevolatility-induced costs with the other regions. The authorsdo find that countries with unequal regional distribution ofnatural resources are more likely to be decentralized. Thisanalysis, however, is not a direct test of the theory as it isnot conducted at the group or region level.

26Overall, richer groups are more likely to supportself-determination movements than poorer ones. It isvery likely that richer groups have a stronger bargainingposition than poorer groups viz. the central government,which could explain why they are able negotiate satisfac-tory autonomy arrangement and thus avoid wars.

27Ethnic civil wars represent roughly half of all civilwars since 1945 to 2005 (Wimmer et al. 2009).

28The relationship between conflict and ethnicity isitself not obvious. As Fearon and Laitin (1996) note,most inter-ethnic interactions are peaceful. Yet, a recentbody of evidence suggests that civil wars may well bemore likely in heterogeneous settings. Montalvo andReynal-Querol (2005) and Esteban et al. (2012) foundthat countries characterized by linguistic polarization aremore prone to civil wars whereas Wimmer et al. (2009)found that participation in civil wars was more likely incountries linguistically fragmented. Denny and Walter(2014) provide a discussion for why civil wars may bemore likely to be initiated by ethnic groups.

29As explained by Wimmer et al. (2009, p. 317), “thisdata set records all politically relevant ethnic groupsminorities and majorities, and their degree of access toexecutive-level state power – from total control of thegovernment to overt political discrimination and exclu-sion. The EPR date set overcomes the limitations ofexisting data sets, especially the widely-used Minoritiesat risk data set, which focuses exclusively on disadvan-taged minorities and is thus unable to capture the dy-namics of ethnic politics at the power center”.

30But the effect of decentralization is canceled oreven reversed when indicators of bureaucratic qualityare high. This is indicative of a complex interplaybetween decentralization and the strength of the state:whereas a well-functioning state (proxied by GDP percapita) is necessary for decentralized provision of pub-lic good to work, well-functioning states also have themeans to be more predatory against ethnic minoritiesthan weaker states (Arcand and Tranchant 2012).

31Hug (2003) argues that since ethnic groups coveredby MAR are selected on the basis of past violence and

discriminations, the use of the dataset to study violenceis potentially problematic. Studies based on the Ethno-Power Relations (EPR), which covers all politically-relevant ethnic groups in the world, should not sufferfrom selection bias.

AcknowledgementsThe authors wish to thank two anonymous referees and the editors foruseful comments and suggestions. This paper has been completed whenThierry Madiès was a Visiting Scholar at the University of Copenhagen.Thierry Madiès thanks the Distance Learning University of Switzerland for thefinancial support. The work of Grégoire Rota-Graziosi was supported by theAgence Nationale de la Recherche of the French government through theprogram “Investissements d’avenir”, ANR-10-LABX-1401.

Authors’ contributionsAll authors read and approved the final manuscript

Competing interestsThe authors declare that they have no competing interests.

Publisher’s NoteSpringer Nature remains neutral with regard to jurisdictional claims inpublished maps and institutional affiliations.

Author details1Department of Economics, University of Fribourg, Fribourg, Switzerland.2University of Clermont Auvergne, CNRS, CERDI, Clermont-Ferrand, France.3Institute of Development Studies, University of Sussex, Brighton, UK. 4CRAG,University of Paris 8 Saint-Denis, Paris, France.

Received: 14 November 2017 Accepted: 10 December 2017

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