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transfers of resources (relative to the union's GDP). These transfers, however
moderate, are a significant resource to bolster regional economies in need,
which, in turn, further suppresses the migration rates. To the extent that the
Structural Funds operate as an insurance device against undesired population
inflows, they can be considered a success. At the other end of the spectrum
is Germany, where a massive outflow from East to West triggered an equally
massive set of transfers, aimed in large part at stopping the population flow
into the West. In this case, the results were mixed at best, though to make this
claim one would have to somehow imagine a counterfactual reunified German
market with no transfers from the West. Undoubtedly, the population outflow
would have been much larger under these circumstances. Taken together, these
experiences support the claim that higher levels of interregional mobility drive
interregional redistributive efforts in political unions upwards, a claim also
confirmed by the quantitative analyses presented in
Chapter 8
.
The findings in this topic also point to a complementary mechanism behind
the size of interregional transfers: the ability of representatives of different
regions to capture rents through the political process. In addition to the quan-
titative evidence in
Chapter 8
, the case studies have robust evidence in this
regard. South European countries successfully used their veto power to increase
interregional transfers during the negotiations leading to the monetary union.
Southern Democrats implicitly achieved some interregional transfers without
risking autonomy through the tax-offset system of unemployment insurance
finally included in the Social Security Act. This ability is readily apparent in
centrifugal systems, but at times it is also observable in systems originally
designed to be centripetal. I have shown how minority governments at the
national level in Madrid almost inevitably imply reforms in the system of inter-
regional transfers to the advantage of regions with pivotal parties. Finally, in
Germany the incorporation of the East created a stronghold of potentially piv-
otal voters. As a result, massive interregional transfers complemented those
channeled indirectly through the system of interpersonal redistribution.
The Dynamics of Inequality in Political Unions
This topic has explained why some political unions are more egalitarian than
others. Those unions with a more heterogeneous economic geography, centrifu-
gal systems of political representation, and low levels of interregional mobility
have less integrated fiscal structures and lower levels of redistribution. As a
result, they will have higher levels of income inequality. The empirical analyses
in this topic have also shown how the interplay over time between economic
geography, representation, and mobility accounts for the dynamics of inequal-
ity in political unions.
Centrifugal representation has emerged as a mechanism that facilitates the
direct transmission of interregional income differences into weaker systems of
redistribution, in turn reinforcing preexisting inequality patterns. It operates as
an important mechanism through which inequality becomes self-sustained over
