Externalities, Institutions and Public Perception: The Political Economy of European Integration Revisited

Summary:

This paper develops a politico-economic model of the joint dynamics of economic interaction and political integration. Based on the theoretical model, we derive several hypotheses on how to explain the recently observable decline in popular support for European integration. These hypotheses are matched with data from various sources in order to scrutinize their empirical validity. The paper proposes a five pillar approach to prevent a counterproductive process of disintegration. Accordingly, (i) common policies must better fit voter preferences, reduce inequality and unemployment, (ii) policy processes must become more efficient, (iii) institutions must enable voters to properly attribute policy outcomes to political actors, (iv) policies should foster cross border political debates, and (v) any further deepening or enlargement of the Union should be based on European wide popular support. We discuss a series of specific policy measures that help to achieve these goals.

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