Both the U.S. and the EU are an economic union: There is a single market for goods, capital, finance, and labor. That is, there is free mobility of goods and services, physical and financial capital, and labor among the member countries of the union. Nevertheless, there is much higher degree of economic policy coordination among the member states of the U.S than of the EU. We argue, by using a model of a union exhibiting migration-based fiscal externality, that the degree of coordination among the member states potentially contribute a great deal to our understanding of observed policy differences between the EU and the US as economic unions: the generosity of the welfare state and the skill composition of migration.
Authors
- Acknowledgements & Disclosure
- No conflicting sources of research support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. Assaf Razin No conflicts of interest on my part.
- DOI
- https://doi.org/10.3386/w28558
- Published in
- United States of America
