Angel de la Fuente and Rafael Domenech
Journal of Common Market Studies, 39 (2), 307-330.
This paper analyzes the redistributive effects of the EU budget
during the period 1986-98, explores the implications of the Berlin
budget agreement and advances a proposal for setting member
countries' budgetary balances in a manner consistent with a simple
equity criterion based on relative income per capita. Using an
extension of a standard methodology, we find that the redistributive
impact of the EU budget has been considerable in view of its small
size, that it has tended to increase over time, and that it is
mostly due to the effects of structural programmes. We also find
that, in spite of the relative loss of weight of structural
transfers, the expenditure side of the Berlin budget agreement
represents a noticeable (but small) improvement over the previous
financial perspectives in terms of both its redistributive impact
and its horizontal equity properties. Our proposed allocation
criterion involves the correction of horizontal inequities while
preserving the current degree of redistribution. This would involve
a sizable reallocation of net contributions across rich countries
and only a modest reduction in north-south fiscal flows.
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