Cultural identity, mobility and decentralization

•Uncoordinated cultural policies lead to suboptimally high levels of cultural identity.•Regions should invest more in common cultural goods and cultural exchange programs.•Richer regions have stronger incentives to invest in cultural identity. Regionalism and efforts to reinforce regional cultural identities are on the rise in Europe. Examples can be found in Spain, Belgium, Italy, Great Britain, and other countries. Regional governments may invest in cultural identity due to beneficial effects on social capital. However, this comes at the cost of cultural adaption costs for non-natives. We propose a simple model of regional culture investments in a federation to investigate such a trade-off. The model shows that uncoordinated cultural policies generally lead to oversupply of regional culture, and that richer regions face higher incentives to invest in regional culture. We conclude that only mild assumptions are necessary to make a strong case for regional cultural integration.