Cultural Differences and Institutional Integration

Luigi Guiso, Helios Herrera and Massimo Morelli ()

Journal of International Economics, 2016, vol. 99, issue S1, S97-S113

Abstract: If citizens of different countries belonging to an economic union adhere to different and deeply rooted cultural norms, when these countries interact they may find it impossible to agree on efficient policies, especially in hard times. Political leaders are bound to follow policies that do not violate their country's cultural norms. This paper provides a simple positive theory and a compelling case study of the Euro area crisis to highlight the importance of cultural clashes when economies integrate. We also provide a normative argument about the desirability of institutional integration: a political union, with a common enforcement agency, is the more beneficial the greater is cultural diversity in an economic union.

Keywords: Cultural norms; Institutions; Euro area; Crisis mismanagement (search for similar items in EconPapers)
JEL-codes: D72 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Chapter: Cultural Differences and Institutional Integration (2016)
Working Paper: Cultural Differences and Institutional Integration (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:99:y:2016:i:s1:p:s97-s113

DOI: 10.1016/j.jinteco.2015.11.005

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