Explaining the demand for sovereignty …An economic perspective

A nice paper by Branko Milanovic and Nicholas Sambanis.

He looks at the economic reasons for countries/regions/states demanding sovereignty from the mainland:

Why do groups want to secede and where are we most likely to see demands for self-determination? This paper proposes an economic explanation whereby a tradeoff between income and sovereignty implies that, other things being equal, richer regions are more likely to want more autonomy and conflict arises due to a disparity between desired and actual levels of sovereignty.

The authors provide simple empirical tests using new data collected at the level of second-tier administrative subdivisions in 48 decentralized countries. They find a positive association between, on the one hand, relative regional income, regional population share, natural resource endowment, and regional inter-personal inequality and, on the other hand, observed sovereignty levels. Ethnically distinct regions have lower sovereignty, but this association is only conditional on controlling for the interactive effects between ethnic distinctiveness and regional inter-personal inequality.

It has a decent literature review on the matter as well.

The effect of income on sovereignty demand is still an open question in the literature. Some political scientists (most prominently, Horowitz 1985) advance a social-psychological perspective, arguing that poorer or more ―backward‖ groups are more likely to want to secede in an effort to increase their group’s social status. By contrast, economists and rational choice sociologists (Spolaore 2008; Hechter 2001) concentrating on the economic costs of sovereignty posit the opposite relationship, since groups or regions with higher income should be in a better position to provide public goods. Our approach is consistent with this economic perspective and considers demands for sovereignty as bids for a measure of decentralization.

Thus we draw on the intuition of earlier economic studies of separatism in which the ability to ―exit‖ is partly a function of income (e.g. Buchanan and Faith 1987). Our thinking is consistent with Tiebout’s (1956) classic model in which the decentralized provision of public goods is an efficient response to competition among sub-national governments over investment, firms, or residents in the presence of heterogeneous preferences. This logic can be found in several earlier economic studies of the determinants of fiscal decentralization. (e.g. Oates 1972; Panizza 1999). In an early contribution to the literature, using country-level data, Oates (1972) showed that, if economies of  scale for the production of public goods are not too large, then decentralization can lead to more efficient allocation of resources by targeting public goods provision to the preferences of local communities.

By this logic, decentralization should reduce social conflict (see Hechter 2001). This is the basic intuition that our paper explores. 

Good read. Will be interesting to do a similar analysis to help figure the rationale for demands for different states in India. Is it just economic perspective?

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