Domino Secessions: Evidence from the U.S

Jean Lacroix, Kris James Mitchener and Kim Oosterlinck
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Kris James Mitchener: Department of Economics, Leavey School of Business, Santa Clara University, CAGE, CESifo, CEPR and NBER

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We analyze how secession movements unfold and the interdependence of regions’ decisions to secede. We first model and then empirically examine how secessions can occur sequentially because the costs of secession decrease with the number of seceders and because regions update their decisions based on whether other regions decide to secede. We verify the existence of these domino secessions using the canonical case of the secession of southern U.S. states in the 1860s. We first establish that financial markets priced in the costs of secession to geographically-specific assets (state bonds) after Lincoln’s election in the fall of 1860 – long before war broke out. We then show that state bond yields reflect the decreasing costs of secession in two ways. First, as the number of states seceding increased, yields on the bonds of states that had already seceded fell. Second, seceding states with more heterogeneous voters had higher risk premia, reflecting investors beliefs that further sub-secession was more likely in these locations.

Keywords: Secession; state debt; interdependence; U.S. Civil War; uncertainty JEL Classification: H77; N21; G12 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ger and nep-his
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https://warwick.ac.uk/fac/soc/economics/research/c ... tions/wp676.2023.pdf

Related works:
Working Paper: Domino Secessions: Evidence from the U.S (2023)
Working Paper: Domino Secessions: Evidence from the US (2023)
Working Paper: Domino Secessions: Evidence from the U.S (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:676

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