Economics of the European Union and International Institutions
Universitat de València
Prof. Néstor Vercher
2023-2024
Activity 1. Unit 3. Is Europe an optimum currency area?
Goal: In principle, the OCA (Optimum Currency Area) theory should tell us whether it
made sense to establish a monetary union in Europe. The answer is unlikely to be black
or white. The benefits are hard to quantify, as are the OCA criteria, each of which may
only be partially fulfilled. However, it is possible to examine a few indicators to estimate
the extent to which EU members meet the OCA criteria.
Tasks:
• The activity should be carried out in groups of 4 people.
• Choose 4 countries, eurozone members, mixing core and peripheral countries
(normally, northern and southern countries). Please select countries you are
familiar with, at least some of them. Your analysis should pay attention to
general trends in the EU and the eurozone, with particular attention to the four
selected countries.
• Collect and analyze data on the following fields (identified in the OCA theory):
• Labor mobility
• Specialization and economic structure
• Openness
• Similar views on macroeconomic policies
• Solidarity
Methods: For this activity, you will combine quantitative and qualitative methods, as
well as primary and secondary data. It means that you will i) use data from different
databases and ii) generate your data. The data will reflect numbers and quantities (e.g.,
number of people employed in a specific sector) as well as perceptions and views on
specific themes (people's opinions on the Euro).
Evaluation:
- Short presentation: 10 minuts approx. You must focus on those most important
and original findings.
- Submission of the full powerpoint file (extended version). Only one member of
the team.
- The final score may differ among team members according to their implication,
participation, and performance during the presentation.
Economics of the European Union and International Institutions
Universitat de València
Prof. Néstor Vercher
2023-2024
Guidelines for Data Collection and Analysis
Labor Mobility
There are always people who move, but do they move enough in response to
asymmetric shocks? Do they promptly take advantage of any difference in earnings and
move to where they can earn more? Is moving better than being unemployed? There
are many impediments to migration. Migrants have to consider many economic issues,
such as:
• The cost of moving, possibly including the selling and buying of dwellings.
• The prospect of becoming unemployed, either in the country of origin or in the
country of immigration.
• Career opportunities (current and future).
• Family career prospects.
• Social benefits (unemployment, health, and retirement).
• Taxation of earnings from labor and savings. Labor mobility is also subject to non-
economic incentives, such as:
• Cultural differences.
• Family and friendship links that can be weakened.
• Commitment to one's country of origin (attachment, nationalism).
For these reasons, labour mobility can be limited. In this study, you should examine
labour mobility data from your selected countries and, if possible, compare it with the
EU/Eurozone average, including comparisons with other OCAs, e.g. the USA.
Secondary data:
- Eurobarometer and related publications à Annual report on intra-EU labour
mobility 2021.
https://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=8458&furt
herPubs=yes
- Geographic Mobility in the European Union: Optimising its Economic and Social
Benefits. https://docs.iza.org/report_pdfs/iza_report_19.pdf
- Recent trends in the geographical mobility of workers in the EU.
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2
ahUKEwjVhfSZ5P-
BAxWnUqQEHd7ODVUQFnoECAgQAQ&url=https%3A%2F%2F2.zoppoz.workers.dev%3A443%2Fhttps%2Fec.europa.eu%2F
social%2FBlobServlet%3FdocId%3D11945%26langId%3Den&usg=AOvVaw2BcM
tF0vfcRMQ0dI1mG5OQ&opi=89978449
Economics of the European Union and International Institutions
Universitat de València
Prof. Néstor Vercher
2023-2024
- Labour Mobility in the EU: Dynamics, Patterns and Policies.
https://www.intereconomics.eu/contents/year/2014/number/3/article/labour-
mobility-in-the-eu-dynamics-patterns-and-policies.html
- European citizens' attitudes towards labour mobility after the pandemic.
https://ec.europa.eu/social/main.jsp?langId=en&catId=89&furtherNews=yes&
newsId=10482
- National Statistics from each country. In Spain.
https://www.ine.es/dyngs/INEbase/es/operacion.htm?c=estadistica_C&cid=12
54736176909&menu=ultiDatos&idp=1254735976597
Primary data (survey)
- Design closed-ended and open-ended questions for relatives and colleagues
from the four selected countries (or at least some of them) in order to evaluate
their willingness to move to other EU countries due to labour reasons. Assess
enabling factors and barriers. Be creative in your questions!
Specialisation and economic structure
Some of the OCA criteria rests on the idea that asymmetric shocks are less likely among
countries that share similar production patterns and whose trade is diversified. To this
aim, comparing the index of specialisation or employment distribution by production
sectors for your selected countries is recomended. Comparisons with EU and eurozone
average can be enlightening. The index looks at how each country’s distribution of
economic sectors differs from the average distribution in the Eurozone.
Secondary data (find data for your four countries):
- Key figures in Europe 2023
https://ec.europa.eu/eurostat/documents/15216629/17706595/KS-EI-23-001-
EN-N.pdf/5df7a393-8461-9270-7eaa-
91a4b1c2acc6?version=3.0&t=1697616189434 à Statistics on business
(sectoral gross value added; sectoral structure of employment
- What's so special about specialization in the euro area?
https://www.ecb.europa.eu/pub/pdf/scpops/ecbop168.en.pdf
o In this report you can use data from the KSI. The Krugman Specialisation
Index (KSI) is a widely-used specialisation measure. It can be seen as a
relative specialisation compared to one other country or to a reference
group, i.e. the EA12 in this case. The Krugman Specialisation Index is
defined as follows:
Economics of the European Union and International Institutions
Universitat de València
Prof. Néstor Vercher
2023-2024
where 𝑠𝑘𝑝 is the GVA share of sector i of country k and 𝑠𝚤 is the GVA share
of sector i of the reference group. It measures the absolute distance
between a sector’s relative importance between k and the reference
group, and then sums all sectors to generate an index.
Since KSI is a relative specialisation measure, the choice of the reference
group is important. Thus, a country which is specialised in the same
industries as the reference group will obtain a lower KSI value in
comparison to a country with a rather homogeneous structure but one
that is different from that of the reference group.
- A regional approach to economic specialisation:
https://ec.europa.eu/eurostat/web/interactive-publications/regions-
2023#agriculture-industry-and-services
Openness
Openness, which may reduce the usefulness of an independent exchange rate, is usually
defined as the share of economic activity devoted to international trade. The ratio of
exports to GDP measures the proportion fo domestic production that is exported. The
ratio of imports to GDP measures the proportion of domestic spending that falls on
imports. The openness index sums up both (imports and exports). You shold examine
these indicators in your countries and compare it with EU average values.
Secondary data
- Key figures in Europe 2023
https://ec.europa.eu/eurostat/documents/15216629/17706595/KS-EI-23-001-
EN-N.pdf/5df7a393-8461-9270-7eaa-
91a4b1c2acc6?version=3.0&t=1697616189434 à Statistics on international
trade in goods with member states
- Imports and exports to GDP. Eurostat Databases:
https://ec.europa.eu/eurostat/web/national-accounts/database
- Eurostat. International trade in goods.
https://ec.europa.eu/eurostat/web/international-trade-in-goods/overview
Similar Views:
Do all countries share similar views about the use of monetary policy? Broadly defined,
political institutions shape their reactions to various events, and policy-making
institutions differ from one country to another. This includes the respective roles of the
executive and the parliament, the number of political parties, the role of trade unions,
the role of ideology, and much more. Although countries are increasingly operating
under common institutions, they do not fully share the same views on every issue that
Economics of the European Union and International Institutions
Universitat de València
Prof. Néstor Vercher
2023-2024
arises. The result is that frictions occasionally flare up among governments, leading to a
sense of antagonism among the public opinion of member countries.
Secondary Data:
In order to examine heterogeneity among national preferences, you are encouraged to
compare past (before EU and/or eurozone membership) and present evolution in basic
macroeconomic indicators (inflation rate, public debt, economic growth, interest
rates...). Eurostat and the European Central Bank are key data sources for these topics.
It is also important to search for past and existing tensions and conflicts among EU
members regarding macroeconomic policies (e.g., newspaper articles). Comparing
political parties (diversity) within national parliaments as well as across countries
(predominant ideologies) may be of great interest.
Primary Data:
Finally, you should consider including a few questions in your survey about the following
topics:
• Familiarity with and perception of the Euro; willingness to return to the previous
currency.
• Trust in common institutions.
• Importance of maintaining a low and stable inflation rate.
• Views on deeper economic integration such as fiscal or political.
• Sense and perception of a common project.
Be creative in your questions!
Solidarity:
How deeply do European citizens feel a sense of solidarity? To what extent are they
willing to give up elements of national sovereignty in the pursuit of common interests?
The European debt crisis offered a real-life test of these questions. The initial reaction
to the Greek debt crisis was to extend collective support, very explicitly in the name of
solidarity. However, as the crisis deepened, nationalistic sentiments started to be
expressed. However, the pandemic, the migration crisis, or the war in Ukraine may
provide slightly different considerations.
Secondary Data:
Use the Eurobarometer to find questions related to solidarity among European citizens,
with particular attention to the selected countries. Some questions included in this poll
are "Do you feel that you are a citizen of the EU?" You can surely find many other
interesting questions to show the level of solidarity in the EU. Newspaper articles are
also useful to state citizens and politicians' opinions/actions on specific issues, such as
those mentioned above (debt crisis, etc.).
Economics of the European Union and International Institutions
Universitat de València
Prof. Néstor Vercher
2023-2024
Primary Data:
You should consider including a few questions in your survey about solidarity in order to
gather answers from your relatives and colleagues from the selected countries. Some
questions could include:
• Concerns about the loss of national control.
• Sense of European identity.
• Sense of solidarity in the EU.
• Perception and opinion on specific conflicts (refugee crisis, debt crisis, pandemic,
etc.).
Be creative in your questions!
