How to design decentralisation to curb secessionist pressures? Top-down vs. bottom-up reforms

This paper looks at decentralisation as an institutional solution for curbing secessionist pressures by making potentially seceding regions strictly better off by staying in the union. We show that a bottom-up decentralisation reform, where single regions that can opt to assume or not stronger fiscal responsibilities on the basis of bilateral negotiations with the central government, may be more successful in avoiding instability and a secessionist conflict than more standard top-down decentralisation, where the central government assigns identical fiscal powers to all regions. The example of the decentralisation process in Spain over the last 40 years illustrates the relevance of the institutional pattern we analyse in the paper.