This paper provides empirical evidence that declaring independence significantly lowers per capita GDP based on a large panel of countries covering the period 1950-2013. To do so, we rely on a semi-parametric identification strategy that controls for the confounding effects of past GDP dynamics, anticipation effects, unobserved heterogeneity, model uncertainty and effect heterogeneity.Our baseline results indicate that declaring independence reduces per capita GDP by around 20% in the long run. We subsequently propose a novel triple-difference procedure to demonstrate the stability of these results. Another methodological novelty consists of the development of a two-step estimator to shed some light on the primary channels driving our results. We find robust evidence that the adverse effects of independence increase in the extent of surface area loss, pointing to the presence of economies of scale, but that they are mitigated when newly independent states liberalize their trade regime or use their new-found political autonomy to democratize.

This paper provides empirical evidence that declaring independence significantly lowers per capita GDP based on a large panel of countries covering the period 1950-2013. To do so, we rely on a semi-parametric identification strategy that controls for the confounding effects of past GDP dynamics, anticipation effects, unobserved heterogeneity, model uncertainty and effect heterogeneity.Our baseline results indicate that declaring independence reduces per capita GDP by around 20% in the long run. We subsequently propose a novel triple-difference procedure to demonstrate the stability of these results. Another methodological novelty consists of the development of a two-step estimator to shed some light on the primary channels driving our results. We find robust evidence that the adverse effects of independence increase in the extent of surface area loss, pointing to the presence of economies of scale, but that they are mitigated when newly independent states liberalize their trade regime or use their new-found political autonomy to democratize.

Reynaerts and Vanschoonbeek (2016) propose a semi-parametric procedure to estimate the economic impact of secession, finding empirical evidence that declaring independence significantly lowered per capita GDP in newly formed states. To demonstrate that these findings appear to hold irrespective of the estimation procedure employed, this addendum formulates a parametric approach to estimate the independence dividend. Our preferred parametric specifications comprise a dynamic, quasi-myopic model of per capita GDP dynamics that controls for country and year fixed effects, the rich dynamics of GDP, finite anticipation effects and a vector of alternative growth determinants. The results indicate that declaring independence reduces per capita GDP by around 15-20% in the long run. These results are qualitatively confirmed when we use non-regional secession waves to instrument for local incentives to secede.

Despite a rich theoretical literature on regional (in)stability, little is known about its empirical validity. This paper presents simulated experimental findings on spatial heterogeneity in regional (in)stability accross 264 regions belonging to 26 European countries. To do so, it develops a broad model of state fragmentation that reconciles the views of the dominant strands in the literature. In order to apply the model, a novel indicator of regional political distinctiveness is proposed, rooted in the discrepancy between regional and national electoral behavior. Calibrating our model to the current European situation, we find that Cataluña, Flanders and the Basque country are the regions currently most likely to break away. In line with these results, governments in all three regions have consistently vocalized demands for increased autonomy -or even secession -in recent years. Denmark, Hungary and Slovenia show up as the most secession-robust European countries.