Which Kind of Fiscal Union? Evidence from a Randomized Conjoint Experiment in Five European Countries

Since the establishment of the Economic and Monetary Union, economists and political scientists alike have been debating the need for and design of a central fiscal capacity. However, such proposals generally meet with strong resistance to or disagreement with certain elements . Sometimes resistance is motivated on purely economic considerations, such as potentially adverse incentive effects or doubts about the effectiveness of the instrument. However, politicians are often more concerned with the general public acceptance of such proposals. This paper focuses on the latter. To explore what citizens really think, we conduct a fully randomized conjoint experiment on 600 alternative designs of a central fiscal capacity on a panel of 10.000 European citizens in five countries. Designs vary across 6 dimensions, including the deployment of budgetary support, the presence of conditions for support, the possibility of fines, the nature of potential oversight, the impact on taxes and on redistribution across countries. Furthermore, we test two frames modelling temporary crises versus permanent shocks to the economy. We expect that citizens in (expected) prospective net-contributor countries are more likely to support schemes that are less redistributive, more investment-oriented and have stronger conditionality. We expect that this will apply in particular when shocks are permanent. Conversely, we expect respondents in (expected) net-recipient countries to be more supportive of designs that involve more redistribution and less conditionality. Authors: Beetsma, Roel; Burgoon, Brian; Nicoli, Francesco; Vandenbroucke, Frank