Labor Mobility and Fiscal Policy in a Currency Union

Arbeitspapier

Labor mobility is commonly taken as a property of an optimal currency area. But how does that property affect the outcome of fiscal policies? In our model, we show that perfect (costless) labour mobility is not necessarily welfare improving, since it prevents the national fiscal authorities from pursuing independent policies, opening the way to a coordination prob-lem. With symmetric shocks, the federal fiscal policy can improve welfare by playing a coordinating role. With asymmetric shocks, the federal policy allows both countries to reach a higher productive efficiency, provided the federal government is endowed with a federal budget.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5159

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Intergovernmental Relations; Federalism; Secession
• Subject: currency union ; labor mobility ; fiscal policy ; federation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baglioni, Angelo ; Boitani, Andrea ; Bordignon, Massimo
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/107358
• Last update: 10.03.2025, 11:44 AM CET