An empirical model of transfers within a federation, with an application to the European Union

The integration of the former communist countries of central and eastern Europe into the European Union creates a dilemma for the EU's regional policy. The EU's expenditure on regional policy (its ‘active’ regional policy) has been guided by political reactions to deepening or enlarging the EU, not by a rational strategy for regional policy. In contrast, the strong EU instrument of state aid control, developed for competition policy (its ‘reactive’ regional policy) has been relatively successful in avoiding a national race of regional subsidies among the member states. We show that a shift from active regional policy to reactive, competition‐oriented, regional policies is the preferred way for the established member states to handle the challenge of enlargement. At the same time, however, this shift is politically difficult for the accession countries to accept, despite the fact that this shift might prove better for them economically. This regional policy dilemma is one of the major obstacles for the full integration of the accession countries into the EU.

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An empirical model of transfers within a federation, with an application to the European Union

Cited by 3 publications

References 12 publications

Modeling fiscal federalism: a decomposition analysis of changes in intra-European Union budgetary transfers

Modeling fiscal federalism: a decomposition analysis of changes in intra-European Union budgetary transfers

Growth at the EU periphery: the next enlargement

The Dilemma of Enlargement for the European Union's Regional Policy

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