Is Independence Possible in an Interdependent World? Scotland vs. the UK's Participation in the European Economy
AbstractMany commentators have criticised the strategy used to finance regional governments such as the Scottish Parliament – both the block grant system and the limited amount of fiscal autonomy devised in the Scotland Act of 2012. This lecture sets out to identify what level of autonomy or independence would best suit a regional economy in a currency union, and also the institutional changes needed to sustain those arrangements. Our argument is developed along three lines. First, we set out the advantages of a fiscal federalism framework and the institutions needed to support it, but which the Euro-zone currently lacks. The second is to elaborate a model of fiscal federalism where comprehensive powers of taxation and spending are devolved (an independent Scotland and the UK remain constituent members of the EU and European economy). Third, we evaluate the main arguments for the breakup of nations or economic unions with Scotland and the UK as leading examples. We note that greater autonomy may not result in increases in long run economic growth rate, but it does imply that enhancing the fiscal competence and responsibility of regional governments would result in productivity gains and hence higher levels of GDP per head. That means the population is permanently richer than before, even if ultimately their incomes continue to grow at the same rate. It turns out that these improvements can be achieved through devolved tax powers, but not through devolved spending powers or shared taxes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Economic Studies Department, College of Europe in its series Bruges European Economic Policy Briefings with number 30.
Length: 40 pages
Date of creation: Oct 2013
Date of revision:
economic federalism; policy centralisation and decentralisation; currency Union; withdrawal from the European Union.;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Klaus Desmet & Michel Breton & Ignacio Ortuño-Ortín & Shlomo Weber, 2011.
"The stability and breakup of nations: a quantitative analysis,"
Journal of Economic Growth,
Springer, vol. 16(3), pages 183-213, September.
- Klaus Desmet & Michel Le Breton & Ignacio Ortuno-Ortin & Shlomo Weber, 2009. "The Stability and Breakup of Nations: A Quantitative Analysis," Vives discussion paper series 10, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, Vives.
- Enrico Spolaore & Alberto Alesina & Romain Wacziarg, 2000.
"Economic Integration and Political Disintegration,"
American Economic Review,
American Economic Association, vol. 90(5), pages 1276-1296, December.
- Wacziarg, Romain & Spolaore, Enrico & Alesina, Alberto, 2000. "Economic Integration and Political Disintegration," Scholarly Articles 4553029, Harvard University Department of Economics.
- Alberto Alesina & Enrico Spolaore & Romain Wacziarg, 1997. "Economic Integration and Political Disintegration," NBER Working Papers 6163, National Bureau of Economic Research, Inc.
- Calmfors, Lars & Wren-Lewis, Simon, 2010.
"What Should Fiscal Councils Do?,"
Seminar Papers, Stockholm University, Institute for International Economic Studies
768, Stockholm University, Institute for International Economic Studies.
- Andrew Hughes Hallett & Drew Scott, 2010. "Scotland: A New Fiscal Settlement," CDMA Working Paper Series 201009, Centre for Dynamic Macroeconomic Analysis.
- Alesina, Alberto & Wacziarg, Romain, 1998.
"Openness, country size and government,"
Journal of Public Economics,
Elsevier, vol. 69(3), pages 305-321, September.
- Alberto Alesina & Roberto Perotti, 1995.
"Economic Risk and Political Risk in Fiscal Unions,"
NBER Working Papers
4992, National Bureau of Economic Research, Inc.
- Kevin H. O'Rourke & Alan M. Taylor, 2013. "Cross of Euros," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 167-92, Summer.
- Alberto Alesina & Enrico Spolaore, 1995.
"On the Number and Size of Nations,"
NBER Working Papers
5050, National Bureau of Economic Research, Inc.
- Andrew Hughes Hallett & Rasmus Kattai & John Lewis, 2012. "How Reliable Are Cyclically Adjusted Budget Balances In Real Time?," Contemporary Economic Policy, Western Economic Association International, vol. 30(1), pages 75-92, 01.
- Hughes Hallett, Andrew & Scott, Drew, 2010. "Scotland: A New Fiscal Settlement," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2010-23, Scottish Institute for Research in Economics (SIRE).
- Alesina, Alberto, 2003. "The Size of Countries: Does it Matter?," Scholarly Articles 4551794, Harvard University Department of Economics.
- Luis Rubalcaba, 2007. "Services in European Policies," Bruges European Economic Policy Briefings, European Economic Studies Department, College of Europe 16, European Economic Studies Department, College of Europe.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Rinaldi).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.