Trade, Development and Political Economy and the Moynihan Institute of Global Affairs present: 

Ibrahim Gunay, Assistant Professor of Economics at SUNY Albany

This paper analyzes the relationship between international trade and political independence movements. In order to test this relationship I use a municipal level dataset from Catalonia. I assume that secession of Catalonia from Spain would lead to higher sectoral trade costs between these two regions, and I compute the counterfactual effects of a secession of Catalonia from Spain on sectors in Catalonia using a standard international trade model with data on bilateral trade flows and production. I find average exposure to Catalan independence in each municipality and test the effect of the variation of exposure to Catalan independence on pro-independence opinions. In order to forge a causal link between these two variables, I use exogenous changes of bilateral sectoral trade costs between Western European countries as an instrument. The estimation results show that municipalities with higher exposure to secession have 9.2% lower pro-independence opinions controlling for other factors. Previous cross-country studies, which do not take into account heterogeneity within a region and endogeneity issues, indicate that there need not be a causal link between international trade and political separatism. In this work, by exploiting tools from international trade models for effects of policy changes, and using a dataset that allows for variation among agents within a region, I fill the gap and show that exposure to international and interregional trade does matter for explaining the variation of political opinions for separatism.

Sponsored by the Trade Development and Political Economy Program at the Moynihan Institute of Global Affairs 

For more information contact: Mengxiao Liu, mliu34@syr.edu

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