Partial decentralization as a way to prevent secessionist conflict

We study secessionist conflict driven by cultural and economic motives in a political union of two regions, and analyze under what conditions partial decentralization may serve as a conflict-mitigating strategy. While the probability of a successful secession is increasing in heterogeneity, it is increasing in interregional income inequality if and only if the union is socially efficient to start with. If the cost of diversity decreases proportionally with decentralization, there always exists a range of decentralization levels compatible with peace. Greater inequality always widens this range but greater heterogeneity widens the range if and only if the union is efficient. The decentralization level implemented to prevent conflict relates to the underlying secession probability. If decentralization is not reversible, peace is not self-enforcing, yet multiple rounds of decentralization can be used to postpone the eventual date of secession.