DP10134 | The Economics of Secession ? Analysing the economic impact of the collapse of the former Yugoslavia

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This paper looks at the economic impact of secession through the lens of the disintegration of the former Yugoslavia. It uses an econometric analysis covering the period between 1956 and 2011 ? including a series of factors linked to the independence process, socioeconomic and structural controls, and the level of development ? in order to assess whether a) breaking away from the former Yugoslavia delivered an ?independence dividend? to the newly independent countries and whether b) independence had a more favourable impact in richer, rather than poorer territories. The results of the analysis underline that there has been no favourable economic impact of secession and that how secession was achieved is key in understanding the subsequent economic performance of the newly independent countries. In cases of secession without conflict, independence did not have a noticeable impact on ensuing economic performance. Secession achieved by conflict, by contrast, seriously dented growth prospects.