Economic Consequences of Montenegrin Independence

I contribute to the understanding of political secessions by studying economic consequences of Montenegrin independence - the last peaceful state-disintegration in Europe. Using Nighttime Lights data I construct an approximation of income per capita for all European countries and selected sub-national regions. In order to model the development of Montenegro in the absence of independence, I employ the Synthetic Control approach with different sets of countries and regions. All specifications show that turning-points of Montenegrin gradual separation had positive effects on its economy. I also find that the last such point - 2006 declaration of independence - explains around 0.5 percentage points of Montenegrin economy annual growth in the following years. Found gains of tourism increase associated with 2006 Independence suggest that tourism is an important mechanism of this effect. Further analysis shows that found effect cannot be fully explained by the EU accession process that began in 2005.