TY  - JOUR
AU  - Alesina,Alberto
AU  - Wacziarg,Romain
TI  - Is Europe Going Too Far?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6883
PY  - 1999
Y2  - January 1999
UR  - http://www.nber.org/papers/w6883
L1  - http://www.nber.org/papers/w6883.pdf
N1  - Author contact info:
Alberto F. Alesina
Department of Economics
Harvard University
Cambridge, MA 02138
Tel: 617/495-8388
Fax: 617/495-7730
E-Mail: aalesina@harvard.edu

Romain Wacziarg
Anderson School of Management at UCLA
110 Westwood Plaza
Los Angeles, CA 90095-1481
Tel: 310 825 4507
Fax: 650/725-7979
E-Mail: wacziarg@gsb.stanford.edu
AB  - This paper examines the process of European political integration.  We start with a political economy model of monetary policy, illustrating a general principle: economic integration requires setting up European institutions endowed with the authority to enact Europe-wide policies.  However, when countries can take advantage of scale effects thanks to economic integration, the need for large countries is reduced.  Thus increased economic integration reduces the need for political integration in Europe.  To reconcile these views, we propose a model for the optimal allocation of prerogatives across levels of government.  When the provision of public goods is characterized by cross-border spillovers, some centralization of policies may be needed to internalize the externality.  These gains from centralization must be traded-off against the costs from imposing the same policies upon heterogeneous groups.  The optimal allocation of prerogatives results from this trade-off.  Using our model as a benchmark, we analyze the institutional incentives at play for the allocation of political prerogatives in Europe and conclude that the EU has gone too far on most issues.
ER  -