Aurélien Saïdi, Alexandra Schaffar, Francisco Serranito
- Abstract
- This study examines the causal relationship between political independence and economic development in small islands and coastal territories using a difference-in-differences methodology with heterogeneous treatment effects. Contrary to the prevailing consensus in the literature that associates independence with inferior economic performance, our results reveal a more nuanced dynamics. While the transition to independence initially triggers a significant contraction in GDP per capita (–5% in the year of independence, followed by an additional –8% the subsequent year), this adverse effect dissipates within three years. Our cohort-specific analysis unveils substantial heterogeneity in post-independence trajectories. Some territories, such as Singapore and Seychelles, experienced remarkable growth following independence, while others faced significant economic decline. This heterogeneity challenges both traditional models of island development: it refutes the assumption that political dependence is necessary for economic success, while also questioning the view that pre-existing economic divergences solely determine political status choices. Implementation of a robust difference-in-differences framework with heterogeneous treatment timing, following recent methodological advances, ensures our findings’ validity under various identification assumptions. Overall, our results suggest that independence’s impact fundamentally depends on idiosyncratic factors that determine a territory’s capacity to transform political autonomy into economic development opportunities.
- Mot(s) clé(s)
- Economic Development, Diff-in-diff, Heterogeneous treatment, Political dependence, Small Islands Developing States (SIDS)
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