The Stability and Breakup of Nations: A Quantitative Analysis

This paper quantitatively analyzes the stability and breakup of nations. The tradeo¤between increasing returns in the provision of public goods and the costs of greater cultural heterogeneity mediates agents preferences over di¤erent geographical con\u85gurations, thus determining the likelihood of secessions and unions. After calibrating the model to Europe, we identify the regions prone to secession and the countries most likely to merge. We then estimate the implied monetary gains from EU membership. 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 \u85nd that economic di¤erences between the Yugoslav republics determined the order of disintegration, but cultural di¤erences, though key, were key to the countrys instability. The paper also provides empirical support for the use of genetic distances as a proxy for cultural heterogeneity