A Single Welfare Benefit Level for Europe? Efficiency Implications of Policy Harmonization in a Federal System

Within the European Union, it has been suggested that greater economic integration will help European economies regardless of the kind of integration Europe chooses to pursue. In this paper, I examine economic integration in the context of redistributive policy and find that the effects of such integration are crucially dependent upon the level of redistribution to be adopted as a common policy, with higher welfare benefit levels associated with lower levels of federation output. This suggests that the case for policy harmonization at a generous level must rest on equity rather than efficiency considerations.