Subsidiarity between Law and Economics. Research Papers in Law, 1/2005

From the Introduction. The present contribution is an attempt to raise awareness between the 'trenches' by juxtaposing the two approaches to subsidiarity. Subsequently, I shall set out why, in economics, subsidiarity is embraced as a key principle in the design and working of the Union and how a functional subsidiarity test can be derived from this thinking. Throughout the paper, a range of illustrations and examples is provided in an attempt to show the practical applicability of a subsidiarity test. This does not mean, of course, that the application of the test can automatically "solve" all debates on whether subsidiarity is (not) violated. What it does mean, however, is that a careful methodology can be a significant help to e.g. national parliaments and the Brussels circuit, in particular, to discourage careless politicisation as much as possible and to render assessments of subsidiarity comparable throughout the Union. The latter virtue should be of interest to national parliaments in cooperating, within just six weeks, about a common stance in the case of a suspected violation of the principle. The structure of the paper is as follows. Section 2 gives a flavour of very different approaches and appreciation of the subsidiarity principle in European law and in the economics of multi-tier government. Section 3 elaborates on the economics of multi-tier government as a special instance of cost / benefit analysis of (de)centralisation in the three public economic functions of any government system. This culminates in a five-steps subsidiarity test and a brief discussion about its proper and improper application. Section 4 applies the test in a non-technical fashion to a range of issues of the "efficiency function" (i.e. allocation and markets) of the EU. After showing that the functional logic of subsidiarity may require liberalisation to be accompanied by various degrees of centralisation, a number of fairly detailed illustrations of how to deal with subsidiarity in the EU is provided. One illustration is about how the subsidiarity logic is misused by protagonists (labour in the internal market). A slightly different but frequently encountered aspect consists in the refusal to recognize that the EU (that is, some form of centralisation) offers a better solution than 25 national ones. A third range of issues, where the functional logic of subsidiarity could be useful, emerges when the boundaries of national competences are shifting due to more intense cross-border flows and developments. Other subsections are devoted to Union public goods and to the question whether the subsidiarity test might trace instances of EU decentralisation: a partial or complete shift of a policy or regulation to Member States. The paper refrains from an analysis of the application of the subsidiarity test to the other two public functions, namely, equity and macro-economic stabilisation.2 Section 5 argues that the use of a well-developed methodology of a functional subsidiarity test would be most useful for the national parliaments and even more so for their cooperation in case of a suspected violation of subsidiarity. Section 6 concludes.

Unity stronger than divisions. Ukraine's internal diversity. OSW Point of View Number 40, March 2014

Ukraine is deeply divided internally, although as a result of the changes that have taken place since its independence, the country’s internal divisions now have less and less to do with territorial divides, and the split into historical ‘sub-Ukraines’ has become less pronounced, especially for the younger generation. Ukraine is not a country of two competing regional identities, one in the west, the other in the east. The western identity, in which the unity of Ukraine is a key value, coexists with the multiple and diverse local patriotisms of the different regions in the east and the south of the country. The present protest movement has consolidated the country’s sense of unity. Its opponents have also been championing the indivisibility of Ukraine, even while they demanded a thorough decentralisation of the country, which was often mistaken for separatism. Russia has been stirring up separatist tendencies in Ukraine, but with little success. Crimea is an exception here, because in most respects it has remained unaffected by the dynamics of the social processes transforming mainland Ukraine – separatist tendencies are indeed deeply rooted in the peninsula.

Kazakhstan: the regional success story; Tajikistan: a trial period; Uzbekistan: the major source of instability in Central Asia? OSW Study 15/2004

Kazakhstan: Kazakhstan can boast economic development like no other country in Central Asia. In contrast to other countries of the region, which have rich natural resources, Kazakhstan has managed to use its economic potential in a way that yields concrete benefits now and, at the same time, creates prospects for further sustainable economic growth. Tajikistan: Tajikistan in its present state has been built on the civil war experiences and provisions of the peace accords signed in 1997. These have had a great impact on the present form of the state, its political scene and power mechanisms. President Emomali Rakhmonov is the central figure in the state. The political system, which he has cocreated, is based on - unique in this region - political pluralism (the existence of the Islamic party), decentralisation (far-going independence of the regions and relatively limited potential of the central structures) and compromise as the basic way of resolving conflicts. Such a system has so far guaranteed stabilisation and normalisation of the country. Uzbekistan: With its geographic location, potential, ambitions and political priorities, Uzbekistan could play a leading role in Central Asia. The international community has perceived the country as the pillar of stability in the region. This perception was further reinforced after 11th September 2001 and was certainly among the factors that inspired the United States to start closer political and military cooperation with Tashkent. The administration in Washington had expected that closer contacts might galvanise political, economic and social change in Uzbekistan, thus reinforcing positive trends in other countries of the region as well. But the relations between Washington and Tashkent are in crisis (which the United States will certainly try to overcome), and we have seen rapprochement between Uzbekistan and Russia and China.

Efficient taxation of multi-national enterprises in the European Union. Bruges European Economic Policy (BEEP) Briefing 5/2003

Current arrangements for multi-national company taxation in EU are plagued by severe conceptual and administrative problems, leading to high compliance costs, considerable uncertainty and ample room for abuse. Integration is amplifying these difficulties. There are two possible approaches in designing an efficient trans-border corporate tax system for the European Union. The first is to consolidate the EU-wide operations of MNEs, using an agreed common base as the reference variable, and then to apportion this total tax base using some presumptive indicators of activity in each tax jurisdiction – hence, implicitly, of the likely benefits stemming from each location. The apportionment formula should respect requisites of neutrality between productive factors and forms of corporate financing. A radically different approach is also available that offers considerable advantages in terms of efficiency, simplicity and decentralisation, including full administrative autonomy of national tax authorities. It entails abandoning corporate income as the relevant tax base and taxing at a moderate rate some agreed measure of business activity such as company value added, sales or employment. These are the variables usually considered in formula apportionment, but they would apply directly without having first to go through the complications of EU-wide consolidation based on a common-base definition. Reference to a broad base, with no exemptions or deductions, would allow to set low statutory rates.

Can Policy Make Us Happier? Individual characteristics socioeconomic factors, and life satisfaction in Central and Eastern Europe. Bruges European Economic Research (BEER) Papers 22/November 2011

In the last decade, Central and Eastern European (CEE) countries have witnessed a rapid economic convergence vis-à-vis Western Europe. However, this rapid growth has not been matched by a similarly rapid increase in life satisfaction, which has remained low in the European context. This paper sets out to address this conundrum, by looking at the individual and macro-level determinants of individual life satisfaction in ten CEE countries. The results highlight that while Central and Eastern Europeans share the same individual determinants of happiness as people in the West (despite some significant cross-country variation), macroeconomic and institutional differences are the key factors behind the lack of convergence in life satisfaction. On the macroeconomic side, GDP growth is still a source of increasing well-being, but the happiness bonus associated with it is becoming smaller. The different levels of individual happiness in CEE are therefore mostly determined by institutional factors such as corruption, government spending and decentralisation, making policies aimed at enhancing institutional quality capable of bringing about substantial improvements in the overall life satisfaction of the people in the region.

From co-operative to competitive localism? The changing balance between equity and efficiency in local government under the Conservative / Liberal Democrat coalition

This paper considers whether there has been a shift in the balance between equity and efficiency in respect of decentralised public policy in England since the election of the Conservative / Liberal Democrat coalition in 2010. Drawing on the literature on policy decentralisation and fiscal federalism from both Political Science and Economics, reasons are discussed why a trade-off between equity and efficiency might be expected. The context of English local government then outlined, and consideration is then given to four areas of policy: business rate localisation, the ‘New Homes Bonus’, council tax benefit and social housing, and regional economic development. In each case, some shift in the balance away from concern with equity towards one with efficiency is discerned: whether or not this is desirable will prove a matter of political and moral, as well as scientific judgement.

Developments in assessment and teaching methodologies in modern languages in England and France in response to educational reform (1975-1985)

This comparative study considers the main causative factors for change in recent years in the teaching of modern languages in England and France and seeks to contribute, in a general sense, to the understanding of change in comparable institutions. In England by 1975 the teaching of modern languages in the comprehensive schools was seen to be inappropriate to the needs of children of the whole ability-range. A combination of the external factor of the Council of Europe initiative in devising a needs-based learning approach for adult learners, and the internal factor of teacher-based initiatives in developing a graded-objectives learning approach for the less-able, has reversed this situation to some extent. The study examines and evaluates this reversal, and, in addition, assesses teachers' attitudes towards, and understanding of, the changes involved. In France the imposition of `la reforme Haby' in 1977 and the creation of `le college unique' were the main external factors for change. The subsequent failure of the reform and the socialist government's support of decentralisation policies returning the initiative for renewal to schools are examined and evaluated, as are the internal factors for changes in language-teaching - `groupes de niveau' and the creation of `equipes pedagogiques'. In both countries changes in the function of examinations at 15/16 plus are examined. The final chapter compared the changes in both education systems.

Understanding change in the public sector:a local authority case study

Increasingly managers in the public sector are being required to manage change, but many of the models of change which are available to them have been developed from private sector experience. There is a need to understand more about how the change process unfolds in the public sector. A case study of change in one local authority over the period 1974-87 is provided. The events surrounding housing decentralisation and the introduction of community development are considered in detail. To understand these events a twofold model of change is proposed: a short wave model which explains a change project or event; and a long wave model which considers how these projects or events might be linked together to provide a picture of an organisation over a longer period. The short wave model identifies multiple triggers of change and signals the importance of mediators in recognising these triggers. The extent to which new ideas are implemented and the pace of their adoption is influenced by the balance of power within the organisation and the political tactics which are used. Broad phases in the change process can be identified, but there is not a simple linear passage through these. The long wave model considers the way in which continuity and change feed off one another. It suggests that periods of relative stability may be interspersed with more radical transformations as the dominant paradigm guiding the organisation shifts. However, such paradigmatic shifts in local government may be less obvious than in the private sector due to the diverse nature of the former.

Foreign direct investment and corruption

In the last few decades, the world has witnessed an enormous growth in the volume of foreign direct investment (FDI). The global stock of FDI reached US$ 7.5 trillion in 2003 and accounted for 11% of world Gross Domestic Product, up from 7% in 1990. The sales of multinational enterprises at around US$ 19 trillion were more than double the level of world exports. Substantial FDI inflows went into transition countries. Inflows into one of the region's largest recipient, the Russian Federation, almost doubled, enabling Russia to become one of the five top FDI destinations in 2005-2006. FDI inflows in Russia have increased almost threefold from 13.6% in 2003 to 35% in 2007. In 2003, these flows were twice greater than those into China; whilst in 2007 they were six times larger. Russia's FDI inflows were also about 2.5 times greater than those of Brazil. Efficient government institutions are argued by many economists to foster FDI and growth as a result. However, the magnitude of this effect has yet to be measured. This thesis takes a Political Economy approach to explore, empirically, the potential impact of malfunctioning governmental institutions, proxied by three indices of perceived corruption, on FDI stocks accumulation/distribution within Russia over the period of 2002-2004. Using a regional data-set it concentrates on three areas relating to FDI. Firstly, it considers the significance, the size and the sign of the impact of perceived corruption on accumulation of FDI stocks within Russia. Secondly, it quantifies the impact of perceived corruption on the volume of FDI stocks simultaneously estimating the impact of the investment in public capital such as telecommunications and transportation networks on FDI in the presence of corruption. In particular, it addresses the question whether more corrupt regions in Russia are also those that could have accumulated more of FDI stocks, and investigates whether those 'more corrupt' regions would have had lower level of public capital investment. Finally, it examines whether decentralisation increases or decreases corruption and whether a larger extent of decentralisation has a positive or negative impact on FDI (stocks). The results of three studies are as follows. Firstly, along with market potential, corruption is found to be one of the key factors in explaining FDI distribution within Russia between 2002 and 2004. Secondly, corruption on average is found to be related to FDI positively suggesting that it may act as speed money: to save their time foreign direct investors might be willing to bribe the regional authorities so to move in front of the bureaucratic lines. Thirdly, although when corruption is controlled for, the impact of the latter on unobservable FDI is found to be on average positive, no association between FDI and public investment is observed with the only exception of transportation infrastructure (i.e., railway). The results might suggest therefore that it is possible that not only regions with high levels of perceived corruption attract more FDI but also that expansions in public capital investments are not accompanied by an increase of the volume of FDI (stocks) in regions with high levels of corruption. This casts some doubt on the productivity of the investment in public capital in these regions as it might be that bureaucrats may prefer to use these infrastructural projects for rent extraction. Finally, we find decentralisation to have a significant and positive impact on both FDI stock accumulation and corruption, suggesting that local governments may spend more on public goods to make the area more attractive to foreign investors but at the same time they may be interested into extracting rents from foreign investors. These results support the idea that the regulation of FDI is associated with and facilitated by a larger public sector, which distorts competition and introduces opportunities for rent-seeking by particular economic and political factors.

Institutional change and the challenge of policy coordination in the English regions

By contrast to major constitutional reforms elsewhere in the UK, in England's eight regions beyond London New Labour has favoured administrative decentralisation. This paper examines these institutional arrangements and assesses their capacity to develop a more integrated approach to territorial development. It confirms a growing awareness of the need to ensure greater coherence between policies to promote economic, social and environmental wellbeing. Nonetheless, a complex regional institutional architecture, inconsistent sector-based strategies, a lack of strategic leadership and blurred accountabilities hamper moves towards policy integration and the delivery of joint outcomes. Moreover, despite ongoing reforms, the absence of a clear regional agenda in a functionally designed Whitehall raises fundamental questions about the ability of sub-national bodies to work collectively to develop and implement a more coherent approach to regional policy.

A diversity dilemma in evolutionary markets

Markets are useful mechanisms for performing resource al- location in fully decentralised computational and other systems, since they can possess a range of desirable properties, such as efficiency, decentralisation, robustness and scalability. In this paper we investigate the behaviour of co-evolving evolutionary market agents as adaptive offer generators for sellers in a multi-attribute posted-offer market. We demonstrate that the evolutionary approach enables sellers to automatically position themselves in market niches, created by heterogeneous buyers. We find that a trade-off exists for the evolutionary sellers between maintaining high population diversity to facilitate movement between niches and low diversity to exploit the current niche and maximise cumulative payoff. We characterise the trade-off from the perspective of the system as a whole, and subsequently from that of an individual seller. Our results highlight a decision on risk aversion for resource providers, but crucially we show that rational self-interested sellers would not adopt the behaviour likely to lead to the ideal result from the system point of view.

Let's stick together? Explaining boundaries to territorial policy variation:the case of Germany's prisons legislation

This article offers an initial impact assessment regarding the introduction of new legislative responsibilities at the Land level in a case study of prisons policy (Strafvollzug). Combining an analysis of new legislation produced across the 16 Länder since the responsibility for prisons policy was transferred to the Land level, and insights into the mechanics of policy development obtained through a series of interviews with senior politicians and officials, this article finds that the desire among Länder to legislative independently has varied, with substantial backing for co-ordination in the development of new legislation. This has helped to confound expectations of a ‘competition of harshness’ which many expected to result from decentralisation. However, even before the 2006 reforms, there were substantial variations between the Länder when it came to implementing prisons policy, so consideration of the sub-national level in this area remains essential.

A Global Review on Peri-Urban Development and Planning

Urban regions worldwide are increasingly facing the challenge of dealing with highly dynamic metropolitan growth and, at the same time, institutional changes like decentralisation and globalisation. These kinds of changes express themselves most evidently in peri-urban areas, where urban and rural life meets. These peri-urban areas in particular have been the stage for rapid physical, social and economic transformations, both in developed and developing countries. Peri-urbanization takes place here. Based on literature review, this paper presents an effort to identify generic attributes of peri-urbanisation and the way in which development planning tends to reply. Three major attributes are identified: peri-urban space (the spatial expression of peri-urban development), peri-urban life (the functional appearance of land uses, activities and peri-urban innovation), and peri-urban change (a causal and temporal perspective featuring flows and drivers of change). It is also shown that prevalent institutional replies in planning and development generally fail to acknowledge the dynamic and increasingly fragmented attributes of global peri-urbanisation.

Should the fiscal powers of the Northern Ireland Assembly be enhanced?

Northern Ireland has been characterised by an inability to narrow the persistent economic gap relative to Britain. Some commentators have suggested that regional Corporation Tax variation may be the “game changer” in closing this gap. This paper draws on a range of papers that help us better understand the historical and institutional context. However, the analysis of tax variation is broader than this. Consideration is given as to which taxes might be the most suitable candidates for devolution. While greater tax variations could certainly complement an emphasis on increased competitiveness aimed at improving economic outcomes, they are no substitute for such a focus. As is often the case in institutional and economic development, issues of sequencing and policy capacity are salient.

Deinstitutionalisieren durch organisationalen Wandel. Selbstbestimmung und Teilhabe behinderter Menschen als Herausforderung für Veränderungsprozesse in Organisationen

Diese Arbeit geht der Frage nach, inwiefern die in der Heilpädagogik unter dem Begriff Deinstitutionalisierung geforderten Reformen wohnbezogener Dienste der sogenannten Behindertenhilfe durch einen Wandel der angesprochenen Organisationen zu realisieren sind. Kern der Arbeit ist eine empirische Studie über die Dezentralisierung und Regionalisierung einer Groß- und Komplexeinrichtung. Zur theoretischen Fundierung der Studie wird der heilpädagogische Fachdiskurs zum Thema Deinstitutionalisierung nachgezeichnet und um eine institutionssoziologische Perspektive des Neoinstitutionalismus ergänzt und weiterentwickelt. Die qualitativ angelegte Studie analysiert in der Folge die strukturellen und inhaltlich-fachlichen Facetten des Wandels der Groß- und Komplexeinrichtung in ihrer Wechselwirkung. Die Ergebnisse zeigen damit die Komplexität der Veränderungsprozesse auf, insbesondere im Hinblick auf die Alltagsrealität von BewohnerInnen in stationären Settings. Durch die Rückbindung der empirischen Ergebnisse zur Deinstitutionalisierungs-Theorie (Heilpädagogik und Neoinstitutionalismus) werden Schlüsselelemente einer aktiven Strategie des Deinstitutionalisierens abgeleitet. Die Studie versteht sich als systemhinterfragender und aktiver Beitrag zur Weiterentwicklung von Erkenntnissen zur Herstellung von Selbstbestimmung und Teilhabe behinderter Menschen. (DIPF/Orig.)