The Institutional Frame: from National Welfare to the EU Social Dimension

Abstract

This chapter opens my analysis on the political economy of European labour market integration. What are the issues at stake in relation to the EU’s social dimension? At one level they address the questions of the distribution of welfare in society. While integration is instigated in anticipation of welfare gains, the net positive effects of integration are usually not Pareto-optimal. The beneficial effects of increased intra-industry trade may thus be countered by welfare losses suffered by particular firms or even regions due to increased inter-industry trade. A lack of social and redistributive measures to counter the allocational effects of European integration may cause alarming disparities between regions and citizens grouping them as either winners or losers. This may severely erode public support and hence the legitimacy of the entire venture. At a macro-level a social dimension may thus be designed to alleviate dislocated regions or perhaps even dislocated segments of the work force.⁵³