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Among all the problems that one can be concerned with, the divergence in price among non-tradeables which exists across the US is not something which threatens to tear the union apart.

However, the US

  1. Has greater internal mobility of labour than the EU will ever have in the foreseeable future, due to the relative lack of language barriers.

  2. Lacks a group of politically dominant states whose growth strategy explicitly involves pillaging the industrial plant of other states. The closest thing the US has is New York, but NY's growth strategy is based on pillaging the entire US industrial plant, including NY's own. Which creates an external imbalance, but not an internal one.

  3. Has an institutional setup that privileges poor states in terms of political power (not because they are poor but because they happen to be thinly populated). That has its own problems, but it does make easier to sustain interstate fiscal transfers in the correct direction.

What reason is there to think that price differentials will diverge at an accelerating rate in the US, rather than arriving at reasonably stable differentials?

#1&2 above.

This would, I take it, be involved in the fight against an explicit industrial policy in service of a tacit industrial policy which would be unlikely to be explicitly adopted?

Yes and no. It's a way to curb the incentive for a member state to obstruct industrial policy in other member states.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Nov 19th, 2010 at 11:47:54 AM EST
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