DP2186 | Social Conflict and Growth in Euroland

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This paper contributes to the literature on the differences in the transmission processes within Euroland. We start from the proposition that there are 'deep' differences in the nature of social conflicts and in the way countries deal with these conflicts. We empirically test this effect for the EU-growth and introduce several proxies for social conflicts and conflict management. We then analyse an EU wide shock and find that differences in the social conflict and the conflict management institutions contribute to different effects on economic growth. We conclude by presenting a model giving a theoretical foundation of the empirical results.