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dimensions of fiscal structures in political unions respond to different politico-
economic motives. So far this chapter has focused on assessing statistically the
hypotheses concerning the determinants of interpersonal redistribution. This
section turns to the second dimension of fiscal structures, namely the transfer
of resources from wealthier to poorer members of the political union.
Recall that according to the argument developed in
Chapter 2
there are two
factors driving the emergence of large levels of interregional redistribution.
The first one operates through the existence of large cross-regional economic
externalities, most notably in the form of labor and/or dependents mobility.
To briefly revisit the theoretical efforts developed in
Chapter 2
, large levels of
mobility within any given union have the effect of homogenizing the risk profile
of workers and dependants. As a result, and in line with the results reported
in
Tables 8.1 and 8.3
, large levels of mobility reduce the range of geograph-
ical income differences among subnational units, thus reducing the incentives
that could otherwise exist to pursue a decentralized system of interpersonal
redistribution.
Because of its potentially disruptive impact on the workings of regional labor
markets or social protection systems, relevant political actors (most notably the
political elites of its wealthier members) have incentives to act preventively in
the hope of limiting undesired population inflows through the use of inter-
regional redistribution. The intuition behind this claim goes as follows. The
interregional transfers of resources will help stabilize the least dynamic regional
economies in the union, hence reducing the outflow of its potentially redundant
labor force. They will also increase the financial ability of the regional incum-
bents of the least well off regions to provide services and fund the provision of
those welfare transfers (typically minimum income and social assistance pro-
grams) they control. This in turn will reduce the outflow of potential benefit
hunters, thus limiting the scope for a welfare magnet effect (Peterson
1995
;
Peterson and Rom
1990
). As the comparative analyses of cases as diverse as
the European Union, Canada, and Germany reveals, the effect of cross-regional
economic externalities seems to be observable across the whole spectrum of sys-
tems of representation. The small amount of actual redistribution at work in the
EU takes the form of interregional transfers from the wealthier to the relatively
poorer members of the union. The empirical analysis in
Chapter 4
showed that
it is systematically associated with patterns of mobility within the union. Like-
wise, in the context of a very different system of representation, I have shown
that the need to limit the outflow of workers and dependents from Eastern
to Western Germany played a key role in politicians' motivations to sustain
a massive redistributive effort on both the interpersonal and the interregional
dimensions following Reunification.
The fact that the influence of mobility on interregional redistribution appears
to be orthogonal to the system of representation does not imply that the latter
lacks a role in accounting for observable differences across countries in the
size of interregional transfers. What the absence of a conditional relationship
between mobility and representation does imply, though, is that the impact of
the balance of power on interregional redistribution occurs directly, through
