Geoscience Reference
In-Depth Information
On the assumption that existing levels of disposable income inequality cap-
ture, even if partially, domestic preferences for levels of fiscal redistribution
(
t
in the model),
Figure 4.5
conveys the picture of a very heterogeneous union.
Moreover, European countries (i.e., regions in the Union) not only differ in
their preferences about redistribution, but also in their levels of economic
resources (
y
in the model). In fact, using the average levels of income inequal-
ity and resources as cutting points, the variation along these two dimensions
can be broken into four subgroups. Spain, Greece, Estonia, and, to a lesser
extent, Hungary and Poland, are countries that are both relatively poorer
and more unequal. In turn, Slovenia, the Czech Republic, and Slovakia, while
being among the poorest members of the EU(25), show very moderate levels of
income inequality. In contrast, the Benelux countries, together with Germany,
Austria, and Scandinavia are relatively richer and fairly egalitarian societies.
Finally, France, Ireland, Italy, and the United Kingdom, while still well off in
terms of resources, show much higher levels of income disparities.
Given these specific patterns of inequality, the adoption of a hypotheti-
cal centralized redistributive policy would imply: (1) a transfer of resources,
inherent to the transfers between individuals, from relatively wealthier to rela-
tively poorer countries; (2) a necessary reduction in the levels of redistribution
enjoyed by lower income citizens of the richer and more egalitarian countries
(most notably, Scandinavia); and (3) an unwelcome disruption of the systems
of redistribution at work in relatively poorer societies. In political terms, these
effects work to facilitate the formation of several coalitions of interests oppos-
ing any change towards a more centralized redistributive system.
As long as political contentions within the EU remain dominated by country
(as opposed to income or class divisions), the incumbents of relatively richer
countries have incentives to block any additional transfer of resources to poorer
countries. In fact, they face heavy electoral constraints. Upper income citizens
of wealthier countries are the likely net payers of any integrated system. Their
first preference is fiscal independence. In turn, poor citizens of rich countries
have no incentives to share their transfers with poorer citizens of poorer coun-
tries. On the contrary, they have incentives to coalesce with their wealthier
fellow nationals to prevent any loss of resources from which they benefit the
most. Indeed, these incentives will be stronger the more generous and egalitar-
ian the domestic welfare state. The well documented distrust of Scandinavian
citizens towards the expansion of EU institutions' powers is consistent with
this line of reasoning (Brinegar, Jolly and Kitschelt
2004
).
9
Finally, it is not
straightforward that poorer nations would automatically endorse a centralized
(HU), Ireland (IR), Italy (IT), Luxembourg (LX), Netherlands (NTH), Poland (PO), Slovak
Republic (SR), Slovenia (SL), Spain (SP), Sweden (SW), and United Kingdom (UK).
9
Lower income citizens of a wealthier state would support the centralization of redistributive
policy only if the levels of generosity they benefit from are extended to the overall union.
However, the budgetary effects that such policy would immediately gather the opposition of
wealthier and less egalitarian societies, thereby rendering it politically unfeasible.
