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Making exit costly but efficient: the political economy of exit clauses and secession

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Listed:
  • Martijn Huysmans

    (Utrecht University)

  • Christophe Crombez

    (KU Leuven
    Stanford University)

Abstract

This article presents a political economic analysis of exit from federations. After the federation has formed, members’ benefits from it may be different than expected. If a member ends up not benefitting, it may wish to secede i.e. exit the federation. Based on formal models, we show how state-contingent exit penalties can induce socially efficient exit decisions: they force the secessionist member to take into account the lost benefits of the federation for the other. Even if ex-ante specified exit penalties cannot be made state-contingent, they may still enhance social welfare by preventing forceful exit. Empirical evidence concerning Montenegro, Saint Kitts and Nevis, and the EU is compatible with these claims. In spite of the simplifications inherent to any modeling exercise, we hope that our results stimulate more research into exit clauses as a means to mitigate the problem of violent secessionism.

Suggested Citation

  • Martijn Huysmans & Christophe Crombez, 2020. "Making exit costly but efficient: the political economy of exit clauses and secession," Constitutional Political Economy, Springer, vol. 31(1), pages 89-110, March.
    • Handle: RePEc:kap:copoec:v:31:y:2020:i:1:d:10.1007_s10602-019-09295-1
    DOI: 10.1007/s10602-019-09295-1
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    Cited by:

    1. Curtis Bram & Michael Munger, 2022. "Where you stand depends on where you live: county voting on the Texas secession referendum," Constitutional Political Economy, Springer, vol. 33(1), pages 67-79, March.

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    More about this item

    Keywords

    Exit clauses; Secession; Separatism; Federations; Civil war;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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