Institutional diversity in the Euro area: any evidence of convergence?
Salvador Pérez-Moreno, Elena Bárcena-Martín & Jo Ritzen
#2017-047
The institutional characteristics of the 19 Euro countries, such as
Government efficiency or undue influence or corporate ethics, have
diverged in the period 2006-2015. This endangers the sustainability of
the EMU, as institutional characteristics are an important element of
competitiveness. We find that the overall inequality in the state of
institutions across the EMU, as measured by the Gini coefficient,
increased. The institutional changes across Euro area countries are
linked both to the differences in the intensity of the financial and
economic crisis (likely to have a two-way causality) as well as the
policy responses in terms of fiscal consolidation applied. The empirical
findings tend to support the call for structural reforms enhancing
institutional quality in order to shorten the institutional gap between
'core' and 'periphery' Euro area countries.
Keywords: institutions, beta-convergence, inequality, Euro area,
competitiveness
JEL Classification: O43, 047, O52