Breaking Up: Experimental Insights into Economic (Dis)Integration

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October 2019
Paper author(s): 
Gabriele Camera
Lukas Hohl
Rolf Weder
Macroeconomics - Economic growth - Monetary Policy

Standard international economic theory suggests that people should embrace economic integration because it promises large gains. But recent events such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment, based on a strategic analytical framework, of how size and distribution of potential gains from integration influence outcomes and individuals’ inclination to embrace integration. We find that cross-country inequality in potential gains acts as a friction to realize those gains. This suggests that to better understand recent phenomena, international economic theory should account for distributional considerations and behavioral aspects it currently ignores.


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