Love on the Rocks: The Causal Effects of Separatist Governments in Quebec

Abstract

Is separatism economically costly or is the violence associated with separatism to blame? Most separatist movements overlap with violent ethnic tensions and are associated with economically destructive outcomes. In this paper, we consider a (largely) peaceful separatist movement. Specifically, we use the synthetic control method to study the economic consequences of the surprising victory of the Parti Québécois in Quebec in 1976 and the subsequent referendum on Quebec’s independence in 1980. We find that, relative to our control, the election of separatists had a small positive effect on economic activity until 1980 after which a small negative effect appears. We find no effects on Canada as a whole as well as similar results following the 1994 election. We further find that the size of the provincial government (relative to GDP) constantly and significantly exceeded the counterfactual. We argue that the economic costs of separatist movements may arise from the frequently associated violence and not be intrinsic to any sort of attempted political disintegration.

Keywords: Quebec, Separatism, Synthetic Control Method, Political Instability, Economic Performance

JEL Classification: E02, F02, N40