Labor Mobility and Fiscal Policy in a Currency Union

Angelo Baglioni, Andrea Boitani and Massimo Bordignon ()

No 5159, CESifo Working Paper Series from CESifo

Abstract: Labor mobility is commonly taken as a property of an optimal currency area. But how does that property affect the outcome of fiscal policies? In our model, we show that perfect (costless) labour mobility is not necessarily welfare improving, since it prevents the national fiscal authorities from pursuing independent policies, opening the way to a coordination prob-lem. With symmetric shocks, the federal fiscal policy can improve welfare by playing a coordinating role. With asymmetric shocks, the federal policy allows both countries to reach a higher productive efficiency, provided the federal government is endowed with a federal budget.

Keywords: currency union; labor mobility; fiscal policy; federation (search for similar items in EconPapers)
JEL-codes: E62 H77 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Labor Mobility and Fiscal Policy in a Currency Union (2016)
Working Paper: Labor mobility and fiscal policy in a currency union (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5159

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