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outward mobility, that is, the proportion of people that move to a different
country altogether. The picture conveyed by this analysis is pretty conclusive:
through interregional transfers aimed to foster economic convergence, net pay-
ers have managed to reduce substantially the mobility rate within net recipient
countries (left panel). Similarly, by targeting resources to backwards regions,
net contributors have succeeded in deactivating potential migration movements
by transient dependents from net recipient areas to contributing areas outside
their nations (right panel). In sum, these findings provide evidence that interre-
gional transfers have limited the potential disruptions associated with market
integration. The efforts by net contributors to prevent potential negative exter-
nalities from the relatively poorer members of the Union appear moderately
successful in light of these results. This success has allowed them to sustain
their commitment to decentralized forms of interpersonal redistribution.
THEORETICAL IMPLICATIONS
This chapter has analyzed the determinants of the EU's fiscal structure as the
outcome of the interplay between a very heterogeneous economic geography
and the need to cope with the externalities emerging from economic integra-
tion. In addressing why the EU combines virtually no system of interpersonal
redistribution through taxes and transfers with a limited, yet highly significant
in relative budgetary terms, system of interregional redistribution, this chapter
has shown that the answer to the first element of this question lies in the com-
bination of a very disperse geography of income inequality and labor market
risk with a highly centrifugal system of political representation. In an effort
that provides broader support to the microfoundations of the argument in this
topic, I have relied on survey data to show how economic geography shapes
the institutional preferences of both individuals and organized political actors
(unions and parties) in ways that are consistent with the analytical premises
of the topic. Subsequently, I have also shown, relying on the DOSEI dataset,
how the unanimity requirement to pass any major change in the Union trans-
lates this diversity of preferences into an institutional gridlock when it comes
to the possibility of pursuing the integration of interpersonal redistribution. As
implied by the argument, the centrifugal nature of the decision making process
facilitates the extent to which territorial inequalities constrain the feasibility of
larger redistributive efforts.
Yet a decentralized systemof interpersonal redistribution requires, according
to this topic's argument, cross-regional externalities to be under control. As
I have shown theoretically and will prove empirically in subsequent chapters,
large levels of mobility put pressure to centralize. Therefore, when a diverse
economic geography and a centrifugal system of representation create strong
pressures to keep interpersonal redistribution decentralized, there are political
incentives to try to keep cross-regional externalities as low as possible. The
analysis of interregional transfers in the EU in this chapter supports this logic.
Interregional redistribution is a tool to contain potential negative externalities
