Working Paper: CEPR ID: DP5918
Authors: Klaus Desmet; Michel Le Breton; Ignacio Ortun; Shlomo Weber
Abstract: This paper presents a model of nation formation in which culturally heterogeneous agents vote on the optimal level of public spending. Larger nations benefit from increasing returns in the provision of public goods, but bear the costs of greater cultural heterogeneity. This tradeoff induces agents' preferences over different geographical configurations, thus determining the likelihood of secession and unification. We provide empirical support for choosing genetic distances as a proxy of cultural heterogeneity. By using data on genetic distances, we examine the stability of the current map of Europe and identify the regions prone to secession and the countries that are more likely to merge. Our framework is further applied to estimate the welfare gains from European Union membership.
Keywords: cultural heterogeneity; European Union; genetic diversity; nation formation; secession; unification
JEL Codes: D70; F02; H40; H77
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cultural heterogeneity (Z19) | Public good provision (H41) |
| Cultural heterogeneity (Z19) | Stability of national borders (F55) |
| Larger nations (F52) | Public good provision (H41) |
| Public good provision (H41) | Likelihood of secession/unification (D74) |
| Cultural heterogeneity (Z19) | Agents' preferences regarding geographical configurations (R32) |