The Economics of Constitutional Change : an analysis of the dominant economic factors for the scenario of Scottish independence

Abstract

On 18 September 2014, the Scottish electorate was asked whether Scotland should become an independent country. Although independence was turned down, the debate has opened up various questions, many of economic nature. This thesis discusses the economics of constitutional change with reference to the case of Scottish independence. It contributes to the academic debate by identifying the factors most critical to the success of an independent Scottish state. At first, the framework of constitutional change and plausible constitutional options for Scotland are outlined. Then, macro- and microeconomic topics relevant to independence are analysed. Detailed attention is paid to the question of currency choice and monetary policy. Other predominant issues under discussion are fiscal policy, state finances and the general impact greater autonomy might have on economic growth. Moreover, a brief case study of the oil and gas industry is utilised as an example of Scotland’s key industries and their impact on the economics of independence. Building on this in-depth literature analysis, the Critical Success Factor model is applied to the scenario of Scotland becoming independent from the United Kingdom. The study results in identifying currency and monetary policy, the oil and gas industry, population, and exploitation of opportunities opened up by independence as the most critical success factors, if success is measured as economic performance relative to the rest of the United Kingdom.