"Subsidiarity, Federalism and Regulatory Competition: A Political Economy Perspective"

This paper shows different effects implied by the subsidiarity principle as viewed from a rational choice perspective. It is conceived as a survey of ideas and of relevant literature. The article gives an overview of theoretical approaches relevant to the issues which bridge the dichotomy of economics and of political science. A main focus is on the link between institutional features and policy outcomes. In this contribution, three main aspects of subsidiarity are looked at. Firstly, the allocation of decision-making power to lower political levels will have repercussions on the behavior of member states and on actors on the sub-national levels (such as national interest groups). In the absence of decisions by institutions of the Union, many policy areas will basically constitute collective action problems: mutually beneficial outcomes (or public goods) can only be secured if member states have no incentives to free ride and if special interest groups are prevented from obtaining benefits to the detriment of the "public interest". Such aspects are considered in Section II. Secondly, subsidiarity may lead to a redistribution of policy competences between the Union institutions and the member states. This has implications on the degree of centralization within the Union (and on political legitimacy). Very prominently, it may to a certain degree introduce competition between national bureaucracies. These issues are addressed in Section 111. Finally, enhanced legislative power for the member states will by necessity lead to the maintenance of a divergence in the laws and the regulations of member states with respect to several policy areas. From an economic perspective, within a common market framework, this implies that national rules and regulations will be in competition with each other -- an effect also provoked by the introduction of the "new approach" in the framework of the internal market program. Section IV provides an overview of theoretical approaches cornected to regulatory competition and illustrates selected evidence from EU practice