The stability and breakup of nations : a quantitative analysis

Abstract

This paper presents a model of nations where agents vote on the optimal level of public spending. Larger nations bene t from increasing returns in the provision of public goods, but bear the costs of greater cultural heterogeneity. This tradeo induces agents' preferences over di fferent geographical con gurations, thus determining the likelihood of secessions or unions. After calibrating the model to Europe, we identify the regions prone to secession and the countries most likely to merge. As a test of the theory, we show that the model can account for the breakup of Yugoslavia and the dynamics of its disintegration. We also provide empirical support for the use of genetic distances as a proxy for cultural heterogeneity.