From Competition to Constitution: Races to Bottoms and the Rise of “Shadow” Social Europe

In this paper, I examine how the specific nature of economic integration in the European Union has affected member states’ redistribution policies over the last two decades. More precisely, I attempt to detail the effect of social-tax competition between member states within social models, processes that I label “races to bottoms.” In this framework, I identify the emergence of an informal set of rules effectively constraining national redistribution policies in different ways, given the diversity of tax-social compacts in the EU. Because these rules are implicit and their effect generally underestimated, I gather them under the notion of “shadow” social Europe. Having empirically assessed the impact of this dynamic on the “continental,” the “Nordic,” the “eastern” and the “liberal” social-tax compact, I finally try to present a normative perspective and some policy options on this matter. I thank Jacques Le Cacheux for guidance, idea-sharing and benevolence, and Jean-Paul Fitoussi for inspiration, support and patience. I also thank participants of the Center for European Studies Visiting Scholars seminar, especially Bo Rothstein and Art Goldhammer, for useful comments, and Andy Martin for a careful reading of a previous draft. The usual disclaimer applies. JEL Codes: B52, D70, N24, N44.