National Identities and Common Policies - A case study of the European Union

Abstract

The last decade of EU politics has been marked by major economic shocks, which have involved the Member States in political quandaries to establish common EU mechanisms to cope with economic downturns. The ties between European Union Member States have grown strongly over the last decades and so did demands for solidarity between them. After the outbreak of the COVID-19 pandemic, political pressure to react in concerted action to mitigate the socio-economic impact of the COVID-19 pandemic has been rising. The present study offers a new Law and Economics view on EU integration and the factors shaping it.

According to criteria identified by federalism economics, integration should be shaped by economic gains, which can be reaped easily where the status quo of national policy frameworks only diverges to a limited extent. Yet, social and employment policies, which are important components for economic recovery after shocks, show that the predictions do not always hold. The application of standard predictions of the political economy of EU integration to social and employment policies shows that these do not always hold in reality. Economic theories consider nations mostly as an administrative entity, overlooking that nations are communities and citizens identify with them. National identity is a marker for a group, and psychologists and sociologists alike have argued on many occasions that such markers impact an individual’s decision. The present study explores how national identity can impact Member States’ decisions to agree on common EU policies.

Identity can be a further motivation for politicians and citizens alike to favour some outcomes over others. Such incentives are not taken into account by existing theories of federalism economics, and this limits their explanatory power. Based on a multi-disciplinary framework, the present research discusses the relevance of adopting a behavioural approach to the economics of federalism to enrich the theoretical debate. The implications of national identity for EU politics are presented and these show the relevance for altering the behavioural assumptions of the existing neoclassical approaches to the questions of the allocation of policy prerogatives to different levels of governance. Drawing on identity economics, a framework is developed, which alters the behavioural assumptions of the rational actor’s model to investigate the implications of national identity. National identity creates cognitive biases for voters and politicians alike. The impact of national identity is situational dependent, it can prohibit efficient centralization among Member States, but in certain situation also encourage common policies.

The present research shows that a behavioural approach to the economics of federalism does not refute existing theories, but that it rather strengthens and supports at least some of the arguments of the existing theories. At the same time, it explains why the predictions from those theories are do not necessarily materialize. Hence, the approach presented in this work provides a more nuanced way to the economic analysis of EU politics and legislation.

This study builds on Law and Economics to discuss the relevance of EU employment and social policy. This study is also about identity and it provides a framework to further existing economic theories. By taking a multidisciplinary approach, the study provides insights for policy discussion and furthers foundational research.