Monitoring European Integration 4: Making sense of subsidiarity: How much centralization for Europe?




David Begg, Jacques Crémer, Jean-Pierre Danthine, Jermey Edwards, Vittorio Grilli, Damien Neven, Paul Seabright, Hans-Werner Sinn, Anthony Venables, Charles Wyplosz


1 Introduction

 1.1 The Purpose of this Report
 1.2 Subsidiarity: What is the Question?
 1.3 Why Does the Burden of Proof Matter?
 1.4 Centralization and Decentralization: Their General Merits
 1.5 Rights of Control and Incompleteness of Contracts
 1.6 Concluding Remarks

2 The Allocation of Powers in the European Community

 2.1 The Allocation of Competences in the European Community
 2.2 The Instruments of Community Legislation and their Implementation
 2.3 Subsidiarity in the Treaty of Maastricht
 2.4 The Nature of Community Power
   2.4.1 The F-Word or the C-Word?: The Meaning of Majority Vote
   2.4.2 The Main Policy Areas
 2.5 A Comparison with Existing Federations
   2.5.1 The Allocation of Functions
   2.5.2 The Nature of Federal Institutions

3. The Principles of Subsidiarity

 3.1 The Benefits of Centralization
   3.1.1 Efficiency
   3.1.2 Equity
   3.1.3 Accountability
   3.1.4 Coordination or Centralization?
 3.2 The Advantages of Decentralization
   3.2.1 Efficiency
   3.2.2 Accountability
   3.2.3 Differentiation or Decentralization?
   3.2.4 The Effects of Diminished Accountability
 3.3 Which Powers Should Go Together?
   3.3.1 Diseconomies of Scope
   3.3.2 Economies of Scope: Efficiency
   3.3.3 Economies of Scope: Accountability
 3.4 Accountability and Subsidiarity: The Evidence
   3.4.1 Direct versus Representative Democracies
   3.4.2 Federal versus Centralized States
   3.4.3 Productive Efficiency in Public Services
 3.5 The Need for Flexibility: Centralization and Policy Reform
 3.6 What Kinds of Jurisdiction Should There Be?
   3.6.1 Size
   3.6.2 Boundaries
   3.6.3 Membership Criteria
 3.7 Centralization, Decentralization and the Second-best
 3.8 Conclusion
 A3.1 The Invisible Foot: Does the Tiebout Hypothesis Justify Decentralized Government?
   A3 .1.1 The Case Against Central Government 59
   A3.1.2 The Tiebout Hypothesis 60
   A3.1.3 Limitations of the Tiebout Hypothesis 61
 A3.2 Centralization and Accountability 63

4 Factor Mobility, Fiscal Competition and the Survival of the Nation State

 4.1 Factor Mobility
 4.2 Principles of Tax Design
 4.3 Fiscal Externalities
   4.3.1 Inefficiency from Externalities
   4.3.2 Fiscal Competition and Distributional Equity
 4.4 Accountability: The Argument Against Coordination at the EC Level
 4.5 Can Capital Income Taxes Survive?
 4.6 Competing for VAT Revenue
 4.7 The Erosion of the Welfare State?
 4.8 Old Age Pensions and Public Debt
 4.9 Conclusions

5 Social Europe, Social Dumping and Subsidiarity

 5.1 Diverse Social Arrangements ...
 5.2 ... To be Harmonized?
 5.3 Social Spillovers in Well-functioning Labour Markets?
 5.4 The Second-best, Fiscal Competition and Social Dumping
 5.5 Minimum Wages and Social Competition
 5.6 Market Power and the Erosion of Labour Market Rents
 5.7 Dumping the Social Chapter

6 Fiscal Policy and Macroeconomic Stabilization

 6.1 Insurance versus Borrowing
 6.2 Moral Hazard
 6.3 Time Inconsistency
 6.4 Adverse Selection
 6.5 Insuring Nations
 6.6 Spillovers
 6.7 Limitations Imposed by the Maastricht Treaty
 6.8 Conclusion

7 Subsidiarity and Regulatory Policy

 7.1 Competition Policy: Mergers, Takeovers and Joint Ventures
 7.2 Environmental Regulation
   7.2.1 Drinking Water
   7.2.2 Pollution of the Rhine
   7.2.3 European Participation in Global Environmental Regulation
 7.3 Agriculture
 7.4 Regional Policy and the Structural Funds
 7.5 The European Satellite Industry
 7.6 Concluding Remarks

8 Concluding Remarks







CEPR Policy Research