Is Europe an Optimal Political Area?

Employing a wide range of individual-level surveys, we study the extent of cultural and institutional heterogeneity within the European Union and how this changed between 1980 and 2009. We present several novel empirical regularities that paint a complex picture. Although Europe has experienced both systematic economic convergence and an increased coordination across national and subnational business cycles since 1980, this has not been accompanied by cultural or institutional convergence. Such persistent heterogeneity does not necessarily spell doom for further political integration, however. Compared with observed heterogeneity within EU member states themselves, or in well-functioning federations such as the United States, cultural diversity across EU members is of a similar order of magnitude. The main stumbling block on the road to further political integration may not be heterogeneity in fundamental cultural traits, but other cleavages, such as national identities.