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The Euro – What's in it for me? An Economic Analysis of the Swedish Euro Referendum 2003

Jonung, Lars LU and Vlachos, Jonas (2007) In Economic Papers
Abstract
The Swedish referendum on the euro in September 2003 is an exceptional event for researchers of monetary unions and of European economic integration. Voters chose between maintaining the domestic currency, the krona, and replacing it with the euro, the single currency of the European Union. The referendum revealed significant dividing lines between Yes- and No-voters in areas such as income, education, sex, employment, geographical location and industrial structure. The aim of this study is to explain the large differences in voting behaviour. The empirical analysis of the referendum outcome is based on the traditional optimum currency area (OCA) approach, merged with an account of the distributional effects of Swedish membership of... (More)
The Swedish referendum on the euro in September 2003 is an exceptional event for researchers of monetary unions and of European economic integration. Voters chose between maintaining the domestic currency, the krona, and replacing it with the euro, the single currency of the European Union. The referendum revealed significant dividing lines between Yes- and No-voters in areas such as income, education, sex, employment, geographical location and industrial structure. The aim of this study is to explain the large differences in voting behaviour. The empirical analysis of the referendum outcome is based on the traditional optimum currency area (OCA) approach, merged with an account of the distributional effects of Swedish membership of the euro area as they were perceived by the voters. The OCA approach builds upon the trade-off between reducing transaction costs by entering a monetary union, thus increasing trade and income, and obtaining macroeconomic insurance by having a domestic currency with a flexible exchange rate. This trade-off was perceived differently by voters depending on their evaluations of the costs or risks and the benefits or gains of adopting the euro versus keeping the krona, the domestic currency. We use the OCA approach to generate a set of hypotheses concerning voting behaviour that are explored in our econometric tests based on exit polls covering more than 10,000 voters on the day of the euro referendum. Our econometric results suggest that the OCA approach has strong predictive power when explaining differences in voting behaviour across groups in society. In particular, we demonstrate that insurance considerations dominated the prospect of reduced transaction costs in the referendum. It did so in a systematic way across segments of society indicating that voters were capable of making rational comparisons of the costs and benefits of monetary unification. Voters asked themselves: The euro – what's in it for me? Then they voted accordingly. (Less)
Abstract (Swedish)
The Swedish referendum on the euro in September 2003 is an exceptional event for researchers of monetary unions and of European economic integration. Voters chose between maintaining the domestic currency, the krona, and replacing it with the euro, the single currency of the European Union. The referendum revealed significant dividing lines between Yes- and No-voters in areas such as income, education, sex, employment, geographical location and industrial structure.
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author
and
organization
publishing date
type
Book/Report
publication status
published
subject
keywords
Euro, krona, referendum, optimal currency theory, monetary union, Sweden, EU, E42, F15, F33, F59, H50, N14
in
Economic Papers
pages
79 pages
ISSN
1016-8060
1725-3187
language
Swedish
LU publication?
yes
id
ebd0a0a0-35c4-4de1-a3a4-cd8eeefd26ac
alternative location
http://www.sieps.se/en/publications/2007/the-euro-whats-in-it-for-me-an-economic-analysis-of-the-swedish-euro-referendum-2003-20072/
date added to LUP
2019-11-18 17:00:49
date last changed
2019-11-19 11:30:37
@techreport{ebd0a0a0-35c4-4de1-a3a4-cd8eeefd26ac,
  abstract     = {The Swedish referendum on the euro in September 2003 is an exceptional event for researchers of monetary unions and of European economic integration. Voters chose between maintaining the domestic currency, the krona, and  replacing it with the euro, the single currency of the European Union. The referendum revealed significant dividing lines between Yes- and No-voters in  areas such as income, education, sex, employment, geographical location and industrial structure. The aim of this study is to explain the large differences in  voting  behaviour. The empirical analysis of the referendum outcome is based on the traditional optimum currency area (OCA) approach, merged with an account of the distributional effects of Swedish membership of the euro area as they were perceived by the voters. The OCA approach builds upon the trade-off between reducing transaction costs by entering a monetary union, thus increasing trade and income, and obtaining  macroeconomic insurance by having a domestic currency with a flexible exchange rate. This trade-off was perceived differently by voters depending on their evaluations of the costs or risks and the benefits or gains of adopting the euro versus keeping the krona, the domestic currency. We use the OCA approach to generate a set of hypotheses concerning voting behaviour that are explored in our econometric tests based on exit polls covering more than 10,000 voters on the day of the euro referendum. Our econometric results suggest that the OCA approach has strong predictive power when explaining differences in voting behaviour across groups in society. In particular, we demonstrate that insurance considerations dominated the prospect of reduced transaction costs in the referendum. It did so in a systematic way across segments of society indicating that voters were capable of making rational comparisons of the costs and benefits of monetary unification. Voters asked themselves: The euro – what's in it for me? Then they voted accordingly.},
  author       = {Jonung, Lars and Vlachos, Jonas},
  issn         = {1016-8060},
  language     = {swe},
  series       = {Economic Papers},
  title        = {The Euro – What's in it for me? An Economic Analysis of the Swedish Euro Referendum 2003},
  url          = {https://lup.lub.lu.se/search/ws/files/71996797/publication10967_en.pdf},
  year         = {2007},
}