Wednesday, 24 October 2012

Greeks vs Germans

Guiso, Herrera and Morelli have a new version of their working paper on "A CULTURE BASED THEORY OF FISCAL UNION DESIRABILITY". They first show just how big cultural differences are between Germans and Greeks; they then move on to build a model of when a fiscal union can work. Interestingly, and contrary to what I expected, they find that diversity is actually good for a  the sustainability of a fiscal union.

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