Market Mechanisms for Policy Decisions: Tools for the European Union

17 Pages Posted: 1 Dec 2000 Last revised: 9 Dec 2022

See all articles by Alessandra Casella

Alessandra Casella

Columbia University - Graduate School of Arts and Sciences, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: December 2000

Abstract

The thesis of this paper is that more transparent, rule-bound and subtle mechanisms for policy coordination will be needed to ensure the success of an enlarged European Union. A common policy is a public good with distributional implications. Economists have developed a large number of plausible market mechanisms for the efficient provision of public goods, and the European Union, with its limited number of members and relative ease of information is a promising ground for such schemes. An important open area of applied research is thus the tailoring of incentive schemes to the specific needs of the European Union and its policy choices. The paper discusses two possible examples: a system of tradable deficit permits to implement the fiscal constraints imposed by the Maastricht treaty; and a rule allowing country representatives to shift their own votes intertemporally when deliberations are taken by vote in periodic committee meetings.

Suggested Citation

Casella, Alessandra, Market Mechanisms for Policy Decisions: Tools for the European Union (December 2000). NBER Working Paper No. w8027, Available at SSRN: https://ssrn.com/abstract=252269

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