Monday, 27 October 2014

Accounting for the Size of Nations: Empirical Determinants of Secessions and the Soviet Breakup

New EHES working paper

The year 2014 has marked the return of secessions as a challenge to existing European states. A referendum on Scottish independence was held in September, and the regional government of Catalonia may follow suit in November. Meanwhile, Ukraine faced secessionist referenda and uprisings in a number of its regions. But why do people demand the formation of new states? A new EHES Working Paper by Marvin Suesse at Humboldt University of Berlin evaluates economic theories of secession.

Participants at a pro-independence protest in Kyiv, Ukraine, in the summer of 1991, demand that “Ukraine leaves the USSR.” Picture credit: Unian.
In much of the economic literature, state size is thought of as the result of a trade-off between the benefits of size and its costs, an idea that goes back to the influential book on “The Size of Nations” by Alberto Alesina and Enrico Spolaore (2003). They propose that benefits of size stem from fixed costs in the provision of public goods, which makes living in a small state costly to each individual taxpayer. The costs of size are due to individual heterogeneity, which reduces the utility from the consumption of public goods to those individuals located far away from the government in terms of preferences or geography. If individuals are located far enough from the source of public goods, they may gain by seceding and providing public goods themselves, even if this provision is proportionally more costly. This basic trade-off can be moderated by a number of factors, such as trade prospects, the degree of democratization, as well as differential income levels between regions.

Although this theoretical framework offers some insights into state formation and dissolution, empirical evidence for it is scarce. This is partly because actual secessions are still relatively rare events. Even where we do observe them, they are difficult to compare across time and space. The new EHES paper by Marvin Suesse circumvents these constraints by looking at variation in the demand for secession expressed by millions of pro-independence protesters across 184 regions of the former Soviet Union. The paper concentrates on the late 1980s and early 1990s, because repression by Soviet authorities had become much more fragmented by that time.

The results indicate that regions that were most different from the center in Moscow in terms of language, ethnicity, religion, or historical experience, saw more secessionist protests on average. Most remarkably, larger regions saw a higher intensity of protests per capita. This supports the theory of the “Size of Nations”. The evidence is further strengthened by the fact that size seems to have acted as a “threshold” condition that determined whether there were any pro-independence protests in a region at all. Very small regions did not experience any secessionist pressure, notwithstanding their ethno-cultural differences with Moscow.

But how was this demand for secession translated into actual policy? The paper also shows that regional elites in the late Soviet Union were actively engaged in secessionist policies, such as issuing separatist declarations and laws. But their determinants seem to have been quite different. To a certain extent, regional elites may have been much more concerned about power considerations than preference heterogeneity with regard to the center. Only once we are able to understand the interplay between popular demand for secession, and the interests of local elites in shaping and transmitting those demands into actual policy, will we be able to fully understand the breakup of states.

The blog post was written by Marvin Suesse, a PhD student at Humboldt-Universit├Ąt zu Berlin

The working paper can be found here.

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