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(Mis)Matches of Institutions: The EU and Varieties of Capitalism

Author

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  • Katja Kalkschmied

    (University of Graz, Austria)

  • Joern Kleinert

    (University of Graz, Austria)

Abstract

We study the crisis of the EU by harnessing a supermodular game approach, which sees institutions as a self-sustaining bundle of rules of the game that are subject to manifold complementarities. Systems of institutions evolve over time and feature country-specific characteristics. EU integration alters the effectiveness of a set of complementary national institutions and can reduce welfare in Member States. The negative effects may be temporary if the national system of institutions changes towards a new, superior equilibrium. The strength and direction of the effects are country-specific and depend on: (i) the fit of the national system of institutions to the new environment, and (ii) the strength of complementarities among institutions. Based on our theoretic framework we assess the five scenarios brought forward in the White Paper on the future of Europe (European Commission, 2017), discuss the conditions under which each scenario works and reflect on them combining our theoretic framework with empirical insights from the Varieties of Capitalism literature.

Suggested Citation

  • Katja Kalkschmied & Joern Kleinert, 2019. "(Mis)Matches of Institutions: The EU and Varieties of Capitalism," Graz Economics Papers 2019-01, University of Graz, Department of Economics.
    • Handle: RePEc:grz:wpaper:2019-01
    as

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    More about this item

    Keywords

    EU crisis; endogenous institutions; complementarities; heterogeneous national systems; market integration;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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