Conversazione con Alberto Alesina

Questo dialogo tra Alberto Alesina e Francesca Guiso è avvenuto nel maggio del 2017, quando Francesca era studente a Wellesley College. Un progetto finale del corso di economia prevedeva un’intervista a un economista riguardo alla sua esperienza come ricercatore, ai suoi progetti, e alle sue opinioni su aspetti rilevanti dell’economia.

Sotto il file audio (in inglese) potete trovare una sintesi dell’intervista.

The Economics of Political Issues: A Conversation with Alberto Alesina

Political and economic decisions have always been inextricably linked. Governments across the globe make decisions that influence the distribution of resources within society, the macro economy, and trade relations between countries. Within academia, some have questioned the treatment of economics and politics as interrelated fields, and whether research in one field should be concerned with questions of the other. Alberto Alesina, Nathaniel Ropes Professor of Political Economics at Harvard University, says he has always been interested in pushing the boundaries of economics in a variety of directions. Alesina is a leader in the field of Political Economics, contributing to a wide range of topics within the field, from the political economy of fiscal policy, to the process of European integration, and the political economic determinants of redistributive policies.

His interest in social issues, at the intersection of politics and economics, extends the relevance and influence of his work well beyond academia. With the rigor of economic analysis, Alesina’s work tackles issues relating to current policy, business, and the functioning of modern society. When it comes to the breadth of his research, Alesina “would describe it like a tree,” whereby working on a particular topic opens up “branches going in millions of directions.” Throughout his career, Alesina’s research interests have been rooted in three main areas of political economy, developing “a tree on fiscal policy, a tree on redistribution, and a tree on culture related issues.”

Fiscal policy regulates government spending and taxation to influence the economy, and is the main tool used to target income inequality. In a paper with Rafael Di Tella and Robert MacCulloch, Alesina documents the issue of inequality from a social perspective, by studying the determinants of individuals’ attitudes towards inequality in Europe and the US. Using 123,668 answers to survey questions on self-reported happiness, Alesina and his co-authors analyse Europe and the US separately, comparing individuals across European countries or US states, who are similar across a large set of characteristics, such as income, age, education, and unemployment status, but differ in their experience of income inequality: the level observed in their country or state. Across income levels, higher levels of inequality are associated with lower individual happiness levels. Despite European countries’ more progressive taxation and more generous welfare state, tolerance of inequality is stronger in the US than in Europe. The effect of inequality has a differential impact on happiness across income groups in Europe and the US. In Europe, the happiness of low-income individuals is more responsive to the level of inequality than the happiness of the rich. In the US the rich are the group whose happiness seems to be most adversely affected by inequality. These findings are consistent with public opinion in Europe and the US, with Europeans objecting to growing inequality in the US and Americans arguing that the welfare systems in Europe hinder innovation. Alesina and his co-authors argue that the difference in results between the US and Europe are driven by differing perceptions of social mobility. Low-income Americans are not as concerned with inequality because they believe they can climb the income ladder, while the rich fear falling behind. In Europe, low-income individuals dislike inequality more, since they feel stuck. Alesina himself thinks that inequality in Europe is an issue, but there is no “general prescription for Europe.” Fiscal policy must be tailored to each country’s unique tax system.

 Much like the US, many European countries face the issue of inequality in intergenerational redistribution, where resources are unequally distributed between today’s elders and the younger generations. “We are not doing a particularly good job,” Alesina says, because the young generation will be burdened with large amounts of debt and bad pension systems. During the financial crisis of 2007-2008 many countries ran large budget deficits, spending more than they earned in revenues each year, in order to jumpstart their economy. The debt accumulation is a serious threat to European and the US economies alike: not responding to these threats means that the next generations will inherit less wealthy and more financially fragile countries.

Part of Alesina’s latest work has been on the interaction between culture and institutions. His most recent paper “Is Europe an Optimal Political Area?”, co-authored by Guido Tabellini and Francesco Trebbi, delves into one of the most currently debated issues in Europe: the future of the European Union. The authors evaluate the extent to which European countries have grown together or apart, in terms of economic outcomes as well as cultural traits, taking a comparative perspective with the United States. Cultural traits are measured using answers to survey questions that relate to five main cultural domains: religiosity, sexual morality, gender equality, the role of the state, and cultural capital.

The results left Alesina “a bit surprised,” as there has been clear evidence of economic convergence across European countries (in terms of inequality, synchronization of business cycles, and GDP growth) but no evidence of cultural convergence among individuals from different countries. The interdependence across EU countries was meant to generate greater economic as well as political integration. The former was achieved, but not the latter. “So what is the problem?” Alesina asks. It is not so much the cultural differences across Europeans that is holding the union back from political integration. The paper compares cultural differences in Europe to differences across US states and finds that “Europeans are just as similar to each other as Americans.” The main factors that could explain differential integration in the EU and the US are language and nationalism.

Unlike the US, where English and Spanish are the most widely spoken languages, 24 different languages are spoken throughout Europe. Language is “certainly important” in defining differences in political union between the US and Europe, Alesina says. First, “it is important in the obvious sense, that it is much more complicated to communicate when people speak 24 different languages rather than one.” Second, “different languages exist because these countries have had different histories, different traditions, so language is correlated with the feeling of nationalism. People don’t want to give up their national government prerogative to the European Union.”

The results on cultural and economic convergence are based on the period between 1980 to 2009, which excludes the aftermath of the financial crisis, and the tensions between Greece and Germany that followed. Stressing the link between economics and politics, Alesina predicts that, while “fundamental cultural similarities have most likely stayed the same,” views about nationalism and mutual trust between countries have probably been “aggravated by the crisis.”

“In some sense this paper ended with a question mark.” Alesina has faith in the functioning of the European Union. His research has found that similarities between Europeans often cross country borders. Northern Italians are more similar to southern Germans than they are to southern Italians, and southern Italians are more similar to the Portuguese than they are to northern Italians. Seeing how single European countries have managed to function well even with large cultural differences within themselves gives Alesina hope for the functioning of the EU despite the lack of cultural convergence that him and his co-authors have detected. Looking forward, “there is a need to make Europeans more convinced that we need a European union.” For Alesina, this means opening up a new branch of research. “We want to go a little deeper: where does this nationalism come from? Is it increasing? Why? And What are the consequences?”