Guiso, Luigi , Herrera, Helios and Morelli, Massimo (2013) A culture based theory of fiscal union desirability. Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2013 (Number 138).

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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 amplified 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 beneficial. Perhaps counterintuitively,
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.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Monetary unions -- European Union Countries, Eurozone, Political leadership -- European Union countries, Political culture -- European Union countries, Financial crises -- Europe
Series Name:	CAGE Online Working Paper Series
Publisher:	Department of Economics, University of Warwick
Place of Publication:	Coventry, UK
Official Date:	June 2013
Volume:	Volume 2013
Number:	Number 138
Number of Pages:	47
Status:	Not Peer Reviewed
Publication Status:	Published

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