Essays on the political economy of European integration
Creators: name: Montanari, Marco <1978>
Publisher: name: Alma Mater Studiorum - Università di Bologna
Year: 2007
Subjects: SECS-P/02 Politica economica

description: Recently, a rising interest in political and economic integration/disintegration
issues has been developed in the political economy field. This growing strand of
literature partly draws on traditional issues of fiscal federalism and optimum
public good provision and focuses on a trade-off between the benefits of
centralization, arising from economies of scale or externalities, and the costs of
harmonizing policies as a consequence of the increased heterogeneity of
individual preferences in an international union or in a country composed of at
least two regions.
This thesis stems from this strand of literature and aims to shed some light
on two highly relevant aspects of the political economy of European integration.
The first concerns the role of public opinion in the integration process; more
precisely, how economic benefits and costs of integration shape citizens'
support for European Union (EU) membership. The second is the allocation of
policy competences among different levels of government: European, national
and regional.
Chapter 1 introduces the topics developed in this thesis by reviewing the
main recent theoretical developments in the political economy analysis of
integration processes. It is structured as follows. First, it briefly surveys a few
relevant articles on economic theories of integration and disintegration
processes (Alesina and Spolaore 1997, Bolton and Roland 1997, Alesina et al.
2000, Casella and Feinstein 2002) and discusses their relevance for the study
of the impact of economic benefits and costs on public opinion attitude towards
the EU. Subsequently, it explores the links existing between such political
economy literature and theories of fiscal federalism, especially with regard to
normative considerations concerning the optimal allocation of competences in a
union.
Chapter 2 firstly proposes a model of citizens’ support for membership of
international unions, with explicit reference to the EU; subsequently it tests the
model on a panel of EU countries.
What are the factors that influence public opinion support for the European
Union (EU)? In international relations theory, the idea that citizens' support for
the EU depends on material benefits deriving from integration, i.e. whether
European integration makes individuals economically better off (utilitarian
support), has been common since the 1970s, but has never been the subject of
a formal treatment (Hix 2005). A small number of studies in the 1990s have
investigated econometrically the link between national economic performance
and mass support for European integration (Eichenberg and Dalton 1993;
Anderson and Kalthenthaler 1996), but only making informal assumptions. The
main aim of Chapter 2 is thus to propose and test our model with a view to
providing a more complete and theoretically grounded picture of public support
for the EU.
Following theories of utilitarian support, we assume that citizens are in
favour of membership if they receive economic benefits from it. To develop this
idea, we propose a simple political economic model drawing on the recent
economic literature on integration and disintegration processes. The basic
element is the existence of a trade-off between the benefits of centralisation and
the costs of harmonising policies in presence of heterogeneous preferences
among countries. The approach we follow is that of the recent literature on the
political economy of international unions and the unification or break-up of
nations (Bolton and Roland 1997, Alesina and Wacziarg 1999, Alesina et al.
2001, 2005a, to mention only the relevant). The general perspective is that
unification provides returns to scale in the provision of public goods, but
reduces each member state’s ability to determine its most favoured bundle of
public goods.
In the simple model presented in Chapter 2, support for membership of the
union is increasing in the union’s average income and in the loss of efficiency
stemming from being outside the union, and decreasing in a country’s average
income, while increasing heterogeneity of preferences among countries points
to a reduced scope of the union.
Afterwards we empirically test the model with data on the EU; more
precisely, we perform an econometric analysis employing a panel of member
countries over time. The second part of Chapter 2 thus tries to answer the
following question: does public opinion support for the EU really depend on
economic factors? The findings are broadly consistent with our theoretical
expectations: the conditions of the national economy, differences in income
among member states and heterogeneity of preferences shape citizens’ attitude
towards their country’s membership of the EU.
Consequently, this analysis offers some interesting policy implications for
the present debate about ratification of the European Constitution and, more
generally, about how the EU could act in order to gain more support from the
European public. Citizens in many member states are called to express their
opinion in national referenda, which may well end up in rejection of the
Constitution, as recently happened in France and the Netherlands, triggering a
European-wide political crisis. These events show that nowadays understanding
public attitude towards the EU is not only of academic interest, but has a strong
relevance for policy-making too.
Chapter 3 empirically investigates the link between European integration
and regional autonomy in Italy. Over the last few decades, the double tendency
towards supranationalism and regional autonomy, which has characterised
some European States, has taken a very interesting form in this country,
because Italy, besides being one of the founding members of the EU, also
implemented a process of decentralisation during the 1970s, further
strengthened by a constitutional reform in 2001.
Moreover, the issue of the allocation of competences among the EU, the
Member States and the regions is now especially topical. The process leading
to the drafting of European Constitution (even if then it has not come into force)
has attracted much attention from a constitutional political economy perspective
both on a normative and positive point of view (Breuss and Eller 2004, Mueller
2005). The Italian parliament has recently passed a new thorough constitutional
reform, still to be approved by citizens in a referendum, which includes, among
other things, the so called “devolution”, i.e. granting the regions exclusive
competence in public health care, education and local police.
Following and extending the methodology proposed in a recent influential
article by Alesina et al. (2005b), which only concentrated on the EU activity
(treaties, legislation, and European Court of Justice’s rulings), we develop a set
of quantitative indicators measuring the intensity of the legislative activity of the
Italian State, the EU and the Italian regions from 1973 to 2005 in a large
number of policy categories. By doing so, we seek to answer the following
broad questions. Are European and regional legislations substitutes for state
laws? To what extent are the competences attributed by the European treaties
or the Italian Constitution actually exerted in the various policy areas? Is their
exertion consistent with the normative recommendations from the economic
literature about their optimum allocation among different levels of government?
The main results show that, first, there seems to be a certain substitutability
between EU and national legislations (even if not a very strong one), but not
between regional and national ones. Second, the EU concentrates its legislative
activity mainly in international trade and agriculture, whilst social policy is where
the regions and the State (which is also the main actor in foreign policy) are
more active. Third, at least two levels of government (in some cases all of them)
are significantly involved in the legislative activity in many sectors, even where
the rationale for that is, at best, very questionable, indicating that they actually
share a larger number of policy tasks than that suggested by the economic
theory.
It appears therefore that an excessive number of competences are actually
shared among different levels of government. From an economic perspective, it
may well be recommended that some competences be shared, but only when
the balance between scale or spillover effects and heterogeneity of preferences
suggests so. When, on the contrary, too many levels of government are
involved in a certain policy area, the distinction between their different
responsibilities easily becomes unnecessarily blurred. This may not only leads
to a slower and inefficient policy-making process, but also risks to make it too
complicate to understand for citizens, who, on the contrary, should be able to
know who is really responsible for a certain policy when they vote in national,local or European elections or in referenda on national or European
constitutional issues.