Efficiency and Federalism in the European Union - the Optimal Assignment of Policy Tasks to Different Levels of Government

Abstract

This paper surveys the theoretical and empirical research on the efficient assignment of policy tasks to different levels of government and applies the results on the delimitation of competences within the European Union. The main results are: (i) A precise derivation of an optimal degree of decentralisation is not possible because of mixed theoretical suggestions. the adequate degree of decentralisation has to be detected case-by-case. (ii) Systematic evidence on direct relationships between economic performance and fiscal decentralisation is ambiguous and scarce. (iii) Comparing the de facto delimitation of EU-competences with the normative recommendations, remarkable discrepancies arise in the fields of agriculture and defence. (iv) The establishment of a flexible assignment-scheme by the European Convention is an undeniable necessity in order to guarantee reversibility and to cope efficiently with changing general conditions.

Keywords: economic theory of federalism, fiscal federalism, decentralisation, allocative efficiency, European integration, constitutional economics, delimitation of competences, European Convention

JEL Classification: H11, H73, H87, P16