We argue that the degree of coordination among the member states potentially contribute a great deal to our understanding of observed policy differences between the EU and the US as economic unions: the generosity of the welfare state and the skill composition of migration

We model an overlapping-generations economy with two skill levels: skilled and unskilled. The welfare-state is modeled simply by a proportional tax on labor income to finance a demogrant in a balanced-budget manner. Therefore, some (the unskilled workers and old retirees) are net beneficiaries...