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Cultural Differences and Institutional Integration

In: NBER International Seminar on Macroeconomics 2015

Author

Listed:
  • Luigi Guiso
  • Helios Herrera
  • Massimo Morelli

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Luigi Guiso & Helios Herrera & Massimo Morelli, 2016. "Cultural Differences and Institutional Integration," NBER Chapters, in: NBER International Seminar on Macroeconomics 2015, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13660
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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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