Why Did the Austro-Hungarian Empire Collapse? A Public Choice Perspective

Abstract

In this paper, we seek to identify the causes of the disintegration of the Austro-Hungarian Empire. We note that the importance of the question of redistribution was relatively minor when compared to the salience attached to issues of self-governance and autonomy of the numerous ethnic groups living within the Empire. From a public choice perspective, the Empire was an over-centralised state and there were clear gains from federalising it. However, such federalisation was not feasible because of the collective action problem arising in bargaining with the central government. Furthermore, the move towards the war economy and the empowerment of the executive state provided the last drop leading to the exit of ethnic minorities from the monarchy and to the ultimate demise of the Empire.

Keywords: Austro-Hungarian Empire, centralisation, ethnic fractionalisation, collective action problem

JEL Classification: D74, D72, N43, N44