DP12017 Is Europe an Optimal Political Area?

Author(s): Alberto Alesina, Guido Tabellini, Francesco Trebbi
Publication Date: May 2017
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Programme Areas: Public Economics, International Macroeconomics and Finance
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12017

Employing a wide range of individual-level surveys, we study the extent of cultural and institutional heterogeneity within the EU and how this changed between 1980 and 2008. We present several novel empirical regularities that paint a complex picture. While Europe has experienced both systematic economic convergence and an increased coordination across national and subnational business cycles since 1980, this was not accompanied by cultural nor institutional convergence. Such persistent heterogeneity does not necessarily spell doom for further political integration, however. Compared to observed heterogeneity within member states themselves, or in well functioning federations such as the US, cultural diversity across EU members is a similar order of magnitude. The main stumbling block on the road to further political integration may not be heterogeneity in fundamental cultural traits, but other cleavages, such as national identities.