DP12398 The Survival and Demise of the State: A Dynamic Theory of Secessions

Author(s): Joan Esteban, Sabine Flamand, Massimo Morelli, Dominic Rohner
Publication Date: October 2017
Keyword(s): conflict, Dynamic Game, Secession, Separatism
JEL(s): C73, D74, H77
Programme Areas: Public Economics, Development Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12398

This paper describes the repeated interaction between groups in a country as a repeated Stackelberg bargaining game, where conflict and secessions can happen on the equilibrium path due to commitment problems. If a group out of power is sufficiently small and their contribution to total surplus is not too large, then the group in power can always maintain peace with an agreeable surplus sharing offer every period. When there is a mismatch between relative size and relative surplus contribution of the minority group, conflict can occur. While in the static model secession can occur only as peaceful outcome, in the infinite horizon game with high discount factor conflict followed by secession can occur. We discuss our full characterization of equilibrium outcomes in light of the available empirical evidence.