Working Paper: CEPR ID: DP834
Authors: Hanswerner Sinn
Abstract: This paper attempts to give a meaning to the empty concept of subsidiarity. It examines various kinds of government activity with respect to the optimal layer of government in Europe at which these activities should be performed. The paper criticizes Europe's industrial policies and its protectionism, and it points to European-wide public-goods and redistribution problems which make centralized government actions a matter of necessity. The paper's main focus is on the free movement of goods, capital, labour and services. It is argued that these movements will induce a process of fierce fiscal competition in which an inverse redistribution from the poor to the rich will emerge, where consumer protection becomes eroded and environmental standards are overdrawn.
Keywords: subsidiarity; fiscal competition
JEL Codes: H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| free movement of goods, capital, labor, and services in Europe (F15) | fiscal competition (H39) |
| fiscal competition (H39) | inverse redistribution from poorer to richer regions (H23) |
| fiscal competition (H39) | undermining redistributive policies (H23) |
| lack of effective centralized governance (H77) | suboptimal public goods provision (H49) |
| fiscal competition (H39) | insufficient tax revenues for public goods provision (H49) |