Sunday, 26 June 2016

Did more old people than young people vote Remain?

According to a YouGov poll on the day of the referendum, 75% of people in the 18-24 age group voted for Remain, compared to 39% in the 65+ age group. I was able to locate two different sources of estimated turnout by age group: a Sky Data poll, and an analysis of data from a Lord Ashcroft poll by Future Canon

According to the Sky Data poll, turnout in the 18-24 age group was 36%, whereas turnout in the 65+ age group was 83%. This implies that 0.75*0.36 = 27% of young people voted Remain, and that 0.39*0.83 = 32% of old people voted Remain. 

According to the analysis by Future Canon, turnout in the 18-24 age group was 32%, whereas turnout in the 65+ age group was 78%. This implies that 0.75*0.32 = 24% of young people voted Remain, and that 0.39*0.78 = 30% of old people voted Remain. 

Having said that, these turnout figures do seem a little implausible. Is it really true that only 32-36% of young people voted? If one instead relies on Ipsos MORI's figures for the last general election, then turnout in the 18-24 age group was 43%, while turnout in the 65+ age group was 78%. This implies that 0.75*0.43 = 32% of young people voted Remain, and that 0.39*0.78 = 30% of old people voted Remain.

Overall, it is not implausible that the proportion of old people who voted Remain is similar to (or even greater than) the proportion of young people who voted Remain. Of course, many more old people than young people voted Leave.

Tuesday, 21 June 2016

My email exchange with Michael Dougan

Dear Professor Dougan,

As someone leaning toward voting Leave in the upcoming referendum, I found the following lecture you gave on the EU quite compelling: 

The reason for my email is that I would like to ask you about an issue not dealt with in the video––which I personally see as the most important one in the debate––namely that we do not appear to face a choice between leaving and staying in the EU as it currently exists, but between leaving and staying in an EU which is moving toward further political integration. I am quite happy to acknowledge that our current membership of the EU is a net positive for the economy, or at the very least not a net negative. However, the real issue to me is not whether our current membership is a net positive for our economy, but whether our future membership will be a net positive for our society.

Is your view that a) the EU will not move toward further political integration in the future, or b) it will move toward further political integration in the future, and this will be good for the British people?

In this regard, I have written a blog post about why I believe a European federal state is not feasible in the near term, even though much deeper fiscal integration is required to make the Eurozone work:

Kind regards,

Noah Carl


Dear Noah

Thanks for your email. Without meaning any offence, the only people I ever hear talking about the EU becoming a federal (super)state are the people who hate the idea. No-one I know working in the field of the EU – and that is a very large number of people in all walks of life – ever thinks about it! And there are two reasons. First, Treaty changes – including of the sort that would be needed to “further integrate” the EU – require unanimous agreement by the 28 Member States followed by 28 national ratification processes. In the UK, that would almost certainly mean… another national referendum on the EU! After all, the European Union Act 2011 requires a national referendum in the UK for any future EU reform which would involve even the slightest increase in the competences of the EU at the expense of the UK. Secondly, the peoples of Europe clearly don’t want a federal superstate: can Leave name a single country that would support this (as opposed to some 1950s statements from a dead politician or the weird musings of some minor living one)?

Best wishes



Dear Michael,

Many thanks for getting back to me so quickly. No offence taken. However, I would make three points in response. 

First, many senior politicians in Europe seem to be in favour of a federal state, as evidenced by statements they have made (I have sources for all these quotes):

"We decided to arrive at a political union via an economic and currency union. We had the hope––and we still have it today––that the Euro will gradually bring about political union... Most member states are not yet fully prepared to accept the necessary constraints on national sovereignty. But trust me, the problem can be solved."
––Wolfgang Schäuble

"The internal market and the common currency demand joint co-ordinating action. This will require us to finally bury some erroneous ideas of national sovereignty... National sovereignty in foreign and security policy will soon prove itself to be a product of the imagination."
––Gerhard Schröder

"The Constitution is the capstone of a European Federal State."
––Guy Verhofstadt

"The EU Constitution is the birth certificate of the United States of Europe. The Constitution is not the end point of integration, but the framework for––as it says in the preamble––an ever closer union."
––Hans Martin Bury

"Of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?"
––Jean-Claude Juncker

"We need a political union, which means we must gradually cede powers to Europe and give Europe control... We cannot just stop because one or other doesn’t want to join in yet."
––Angela Merkel

Second, if a European federal state were not the ultimate end point, why does the EU have a motto, an anthem, a flag, an annual holiday, a mascot, and even a personification (the mythological figure Europa)?

Third, as I noted in the blog post I linked you to in my first email, much deeper fiscal integration is arguably needed to make the Eurozone work.

Kind regards,


Tuesday, 14 June 2016

Can the Eurozone survive?

The Eurozone faces a crisis of epic proportions. Unemployment in Spain stands at over 20%. Youth unemployment in Greece exceeds 50%. GDP per capita in Italy is back to where it was in 1996. This crisis––the crisis of the single currency––was not without forewarning. A number of prominent commentators predicted it some years in advance. One such commentator was the economist Martin Feldstein, who in a 1997 Journal of Economic Perspectives article noted:
My own judgement is that the net economic effect of a European Monetary Union would be negative. The standard of living of the typical European would be lower in the medium term and long term if EMU goes ahead than if Europe continues with its current economic policies…
Another such commentator was Baroness Thatcher, who in a 1992 interview with Forbes remarked:
Every single fixed exchange rate has cracked in the end. We’re all at different levels of development of our economies. Some countries simply couldn’t live up to a single currency. It would mean massive extra subsidies from the rest of us for them or massive movements of immigration from their countries into ours. Both would cause resentment and not produce harmonious development.
Arguably most prescient of all, however, was the Nobel Prize-winning economist Milton Friedman, who in a 1997 article for Project Syndicate wrote:
Europe’s common market exemplifies a situation that is unfavourable to a common currency. It is composed of separate nations, whose residents speak different languages, have different customs, and have far greater loyalty and attachment to their own country than to the common market or to the idea of “Europe”. Despite being a free trade area, goods move less freely than in the United States, and so does capital. 
The European Commission based in Brussels, indeed, spends a small fraction of the total spent by governments in the member countries. They, not the European Union’s bureaucracies, are the important political entities. Moreover, regulation of industrial and employment practices is more extensive than in the United States, and differs far more from country to country than from American state to American state. As a result, wages and prices in Europe are more rigid, and labour less mobile. In those circumstances, flexible exchange rates provide an extremely useful adjustment mechanism… 
The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues.
As the quotations above imply, in order to make the Eurozone work, much greater fiscal integration of Eurozone economies is required. Employment and industrial law will need to be harmonised still further; various tax and spending powers will need to be transferred to Brussels; and far higher levels of inter-state migration will need to be encouraged. For illustration, compare the EU to the United States––a rather more successful monetary union. Whereas the EU (of which the Eurozone comprises the larger part) accounts for only ~3% of spending in Europe, the US federal government accounts for ~60% of spending in America. Whereas rich EU countries such as the Netherlands make net contributions on the order of 0.4% of GDP, rich US states such as Connecticut run net fiscal balances (federal taxes paid minus federal spending received) on the order of 5% of GDP. And whereas just ~4% of people who were born and still reside in the EU live outside their country of birth, ~31% of people who were born and still reside in the US live outside their state of birth. 

Is wholesale fiscal integration of Eurozone economies achievable? Evidence from surveys and opinion polls suggest that it is very likely not.

First, despite the EU’s extensive efforts to cultivate a Pan-European identity, Europeans continue to identify more with their nation than with Europe as a whole. There is no European demos. In the 2014 wave of the Eurobarometer survey, respondents were asked to say whether they identified: with their country only; with their country first, then Europe; with Europe first, then their country; or with Europe only. The average proportion identifying with their country only or with their country first was >90%; in no country did less than 75% of people identify as such. And if we again turn our attention to the United States, we see a starkly different picture. Only a tiny fraction of Americans––around 7%––identify more with their state than with the United States itself. 

Second, when questioned specifically about taxation, social spending and employment law, most Europeans are decidedly sceptical about further centralisation. In the 2005 wave of the Eurobarometer survey (administered before the financial crisis), respondents were asked to state, for each of a number of policy areas, whether they believed decisions should be taken separately at the national level or jointly at the EU level. Only 39% supported joint decision-making on fighting unemployment; only 29% supported joint decision-making on health and social welfare; and only 25% supported joint decision-making for taxation. 

Third, there appears to be little appetite for softening the terms of the Greek bailout deal among citizens of the rich, creditor nations in Northern Europe. A YouGov poll conducted in July of 2015 found that 53% of Swedes, 61% of Germans, 64% of Danes and 74% of Finns were opposed to any renegotiation of Greece’s debt repayments. Moreover, sizable majorities in each of these countries––65% in Sweden, 59% in Germany, 70% in Denmark and 73% in Finland––blamed the Greek crisis squarely on successive Greek governments, rather than on either the troika (the EU, the IMF and the ECB) or on both Greek governments and the troika. The same poll found that 47% of Germans expressed a preference for Greece to leave the Eurozone. This percentage had risen to 59% in another YouGov poll carried out one month later. 

In conclusion: the Eurozone is currently embroiled in a crisis, a crisis which can only be overcome through much greater fiscal integration of Eurozone economies. Yet wholesale fiscal integration is not achievable in the near term. Europeans identify much more strongly with their nation than with Europe as a whole; they are largely opposed to the centralisation of taxation and social spending; and those living in the rich, creditor nations of Northern Europe show little appetite for fiscal transfers to their crisis-stricken counterparts in Greece. As Larry Elliot comments in The Guardian:
Brexit will remain a live issue unless the eurozone can sort itself out. That means either admitting that the euro has been a terrible mistake, or going the whole hog and integrating further, with a single banking system, a Europe-wide treasury, and a democratically elected finance minister with the power to raise money in Germany and spend it in Greece. This is not going to happen any time soon, and perhaps never.

Friday, 10 June 2016

Groups that the public believe benefit more from the EU are more pro-Remain

Recently, YouGov asked the British public which groups benefit or lose out most from the European Union. Specifically, they asked respondents to select up to 3 groups from a list of 12 which they believed benefit most from the EU, and 3 groups which they believed lose out most from the EU. I calculated the balance of opinion on each group as the percentage of respondents who identified it as benefiting from the EU minus the percentage who identified it as losing out from the EU. 

For each group, I then obtained an estimate of the percentage of group members who want the UK to remain in the EU, as well as the percentage who want the UK to leave the EU. The estimates for big business were obtained by averaging across the percentages reported by the CBI for the ADS, the BCC, the CIA, the CECA, the CBI, the FDF, the SMMT and TechUK. The estimates for the finance industry were obtained by averaging across the percentages reported for the BBA, Deloitte and Goldman Sachs. The estimates for small business were obtained by averaging across the percentages reported for the FSB and the percentages reported in a recent YouGov poll. The estimates for farmers were obtained from a recent poll by Farmers Weekly. The estimates for politicians were obtained from the list of MPs compiled by Euro Guido. Estimates for the well-off, students, the unemployed, the employed, the poor, and pensioners were obtained from the 2015 wave of the British Election Study (BES) panel. (Because the overall sample in the BES was skewed toward Remain (relative to now, 47–34), I subtracted 2 percentage points from each Remain percentage, and added 8 percentage points to each Leave percentage.) I could not find estimates for trade unions.

I calculated the balance of opinion on whether the UK should leave the EU within each group as the the Remain percentage minus the Leave percentage. The chart below plots this balance of opinion against the balance of opinion on whether each group benefits from the EU.

There is a remarkably strong association between the two variables (r = .93, p < 0.001). Groups that the public believes benefit more from the EU tend to be more pro-Remain. This is perhaps not surprising, however. It could simply be that members of the public evaluate how much each group benefits from the EU by reviewing instances they can recall of each group arguing for or against the EU. In other words, they assume that groups (e.g., big business) who tend to write letters to newspapers or appear on television arguing in favour of the EU must benefit more from the EU.

Wednesday, 8 June 2016

Comparison between Chile and Venezuela

The chart below, based on data from the IMF, shows change in real GDP per capita in Chile and Venezuela since 1980. GDP per capita has increased by 177% in Chile, but has fallen by 22% in Venezuela. According to the CIA World Factbook, 14% of Chileans live in poverty, compared to 32% of Venezuelans (the latter figure, from 2013, is almost certainly an underestimate).