The Price of Empire: Unrest Location and Sovereign Risk in Tsarist Russia

TL;DR

This paper examines how the location of unrest within Tsarist Russia affected sovereign risk, revealing that unrest in distant imperial territories increased risk more than unrest in the capital or nearby areas.

Contribution

It introduces an analysis of unrest location's impact on sovereign risk in a large empire, highlighting the significance of remote unrest on financial stability.

Findings

Unrest in imperial territories raises sovereign risk more than unrest in homeland areas.

Unrest in Ukraine notably increases sovereign risk.

Repression costs and investor confidence are affected by unrest location.

Abstract

Research on politically motivated unrest and sovereign risk overlooks whether and how unrest location matters for sovereign risk in geographically extensive states. Intuitively, political violence in the capital or nearby would seem to directly threaten the state's ability to pay its debts. However, it is possible that the effect on a government could be more pronounced the farther away the violence is, connected to the longer-term costs of suppressing rebellion. We use Tsarist Russia to assess these differences in risk effects when unrest occurs in Russian homeland territories versus more remote imperial territories. Our analysis of unrest events across the Russian imperium from 1820 to 1914 suggests that unrest increases risk more in imperial territories. Echoing current events, we find that unrest in Ukraine increases risk most. The price of empire included higher costs in projecting force to repress unrest and retain the confidence of the foreign investors financing those costs.