Geoscience Reference
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devoted to the transfer of resources between countries, that is, of programs of
interregional redistribution. I turn now to explain these developments.
SUSTAINING AUTONOMY, MANAGING RISKS: THE LOGIC BEHIND
EUROPE'S FISCAL STRUCTURE
A central theme in this topic is that the specific design of fiscal structures in
political unions reflects the balance between the decentralizing effects associ-
ated with economic geography and the centralizing push associated with large-
scale cross-regional externalities. When both these factors are strong political
elites face a trade-off between their need to protect their political autonomy
and their need to cope with cross-regional externalities. The solution to this
trade-off, this topic argues, lies precisely in increasing the effort in interre-
gional redistribution as a way to protect a decentralized system of interpersonal
redistribution.
The evolution of interregional redistribution within the European Union
fits this logic quite closely. The economic and political differences between the
members limit the feasibility of a centralized system of interpersonal redistribu-
tion. In turn, the integration of markets creates room for significant economic
externalities between the Union's members, such as the mobility of large con-
tingents of unskilled labor or the increase in competition for producers. These
externalities affect all members of the newly created market, albeit in different
ways. The fears of the British, Danish, or German government are likely to
be different from the fears of the Spanish, Greek, or Portuguese governments.
Fears are largely associated not only with the level of economic growth of
different countries, but also with the specificities of their political economies
and labor markets. Scandinavian citizens see in Europe a risk to their welfare
states (S anchez-Cuenca
2002
). Likewise, many French citizens perceive market
integration to threaten the peculiarities of their respective social and economic
models (Hobolt and Brouard
2010
). At the same time, South European citi-
zens see with a mix of hope and concern the adjustment of their economies to
the standards imposed by the largest and more advanced European economies
(European Commission
2002
,
2003
,
2004b
).
The integration of fiscal structures is meant to deal with these concerns
and facilitate the functioning of larger markets (Mattli
1999
). Whether such
integration affects primarily policy instruments devoted to interpersonal or
interregional redistribution ultimately depends on the economic geography
of the Union. In the absence of large differences in income levels, economic
specialization or demographic structures, fiscal integration is expected to occur
via interpersonal redistribution.
The difference between Europe and other experiences lies precisely in the
constraints that emerge from the commitment of member states to fiscal policy
autonomy. I will show that such commitment derives directly from the het-
erogeneous nature of Europe's geography of income and labor market risk.
The EU represents a case of confederation in which the existence of potential
