Guiso, Luigi, Herrera, Helios and Morelli, Massimo (2016) Cultural differences and institutional integration. Journal of International Economics, 99 (Supplement 1). S97-S113. doi:10.1016/j.jinteco.2015.11.005

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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.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions J Political Science > JN Political institutions (Europe)
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Eurozone, European Union countries, Europe -- Economic integration
Journal or Publication Title:	Journal of International Economics
Publisher:	Elsevier BV
ISSN:	0022-1996
Official Date:	March 2016
Dates:	Date Event March 2016 Published 18 November 2015 Available 10 November 2015 Accepted 3 August 2015 Submitted
Volume:	99
Number:	Supplement 1
Page Range:	S97-S113
DOI:	10.1016/j.jinteco.2015.11.005
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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