Economic Benefits of Ethnolinguistic Diversity: Implications for ...

In the current times, however, the situation has changed, and we have been observing a trend toward a formation of smaller and more homogeneous countries. The first reason behind the change is the alternation of the trade-offs between the benefits of size and the costs of heterogeneity. The liberalization of trade and the reduction of warfare diminish the benefits stemming from a bigger size. The second reason behind the trend toward the formation of smaller and more homogeneous states is the increase in democratization. Democratization made it possible for people to voice their opinion and to make demands for the creation of separate states for their ethnic groups.

According to Alesina and Spolaore (2003), the trend toward the formation of smaller and more homogeneous states will continue in the future. The increases in democratization will lead to the breakup of large political jurisdictions into smaller ones. Decentralization can substitute for the secessions—but only up to a point. Especially in developing countries, the fiscal decentralization has not been successful, and it has created more problems than it has solved. Therefore, according to the authors, next to decentralization we will see an increased trend toward separatism and secession.

The breaking up of the multiethnic states into smaller and more homogeneous units is not perceived by Alesina and Spolaore (2003) as something negative. On the contrary, they said that “a more peaceful world can be organized in smaller and more numerous states” (p. 218). They presented a vision of the future where the world would be composed of small countries that would coexist peacefully in an economically integrated world. The small countries would depend on the supranational institutions to enforce free trade and the functioning of the markets. Therefore, the insistence on keeping heterogeneous states together in an increasingly integrated world is misplaced and unnecessary. “Excessive insistence on keeping heterogeneous countries together implied sizable costs in religious, ethnic, racial, and cultural animosities among peoples as recent events in the Balkan states amply testify” (p. 223).

Thus, the perception of ethnic diversity as a cost has led the scholars who share this view to perceive the secessionist movements and the breaking up of large multiethnic states into smaller and more homogeneous units as something desirable.