A Culture Based Theory of Fiscal Union Desirability

Luigi Guiso, Helios Herrera and Massimo Morelli
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Helios Herrera: HEC Montreal
Massimo Morelli: Columbia University

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: If voters of different countries adhere to different and deeply rooted cultural norms, the country leaders may find it impossible to agree on efficient policies especially in hard times. The conformity constraint -political leaders unwillingness or impossibility to depart from these norms - has resulted in lack of timely intervention which has amplied an initially manageable debt crisis for some European countries to the point of threatening the Euro as a single currency. We show the conditions under which the introduction of a fiscal union can be obtained with consensus and be bene cial. Perhaps counter- intuitively, cultural diversity makes a fiscal union even more desirable. Some general lessons can also be drawn on the interaction of cultural evolution and institutional choice.

Keywords: Conformity constraint; culture; debt crisis; fiscal union. (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cdm and nep-eec
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:138

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