European welfare states in competition

Abstract

The Maastricht Treaty (1992) has meant an important step forwards in the process of European integration. Not only goods and financial markets, but als labour markets are freed from national barriers. Will this lead to significant increases in migration flows? The differences in wage and unemployment levels between different member states are significant; and the same is rue for differences in what is called socal wage. However, the character of labour services is quite different from that of goods and capital services. It is physically bound to human beings, which means that the cultural factor can be a serious barrier for moving. In order to prevent regional inequality and/or significant migration flows, member states are enforced to make their labour market institutions as competitive as possible. This paper deals with this phenomenon of institutional competition. Results from the field of public scoice and spatial economics are presented. Liberally oriented institutions appear to drive out more conservative or socialist institutions. If the EU srives for a complete poitical integration between all members, where any form of discremination between EU-citizens is forbidden, coordination between the different welfare regimes is necessary. As long as this coordination is not achieved, the country of birth mus continue to play a role in the European welfare regimeinternational economics and trade ;