Cultural Differences and Institutional Integration

Luigi Guiso, Helios Herrera and Massimo Morelli ()

No 529, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: If citizens of different countries belonging to an economic union adhere to different and deeply rooted cultural norms, when these countries interact their leaders may find it impossible to agree on efficient policies, especially in hard times. Political leaders’ actions are bound to express policies that do not violate these norms. This paper provides a simple positive theory and a compelling case study of the importance of cultural clashes when economies integrate, as well as a normative argument about the desirability of institutional integration. Namely, we argue that a political union, with a common institutions and enforcement of rules, is a solution which is most beneficial the greater is cultural diversity in an economic union. JEL Classification: D72 Keywords: Cultural Norms, Institutions, Crisis Mismanagement.

Date: 2014
New Economics Papers: this item is included in nep-cdm, nep-pol and nep-soc
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Citations: View citations in EconPapers (3)

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Chapter: Cultural Differences and Institutional Integration (2016)
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