Local secessions, homophily, and growth. A model with some evidence from the regions of Abruzzo and Molise (Italy, 1963)

Abstract

This paper analyses the case of a local secession, i.e. the birth of a new local jurisdiction by separation from an existing one. We present a stylized model in which society is composed of heterogeneous groups and individuals have an homophily bias. The model predicts that: (i) separations, such as the split of a territory into distinct administrative units, occur when the costs of mixed communities are sufficiently large; (ii) the smaller community drives the decision to secede; (iii) welfare gains from the split are associated with positive population growth; (iv) higher payoffs under separations, however, might be related to taste for sameness only, with no (or even negative) effect on economic growth. Empirically, we exploit the secession of the Italian region of Molise from Abruzzo in 1963, a unique event in Italian history. Historical records document that the split was the result of pressures from Molise, the smaller community. Our evidence suggests that the split was associated with population inflows in both areas. Finally, by using a synthetic control approach, we show that the split caused significant benefits to per-capita GDP growth, in both regions.