European Integration: Some stylised facts

member countries. With the current social benefit regulations, the contribution
of the migrant towards the production in the host country will be smaller than
the wage and social benefits received by the migrant after tax. This will result
in a welfare loss (Sinn (2000)) of the current citizens in the host country. As the
choice of destination country of the migrant in part will depend on wages and
social benefits after tax, the individual country will have an incentive to offer
the lowest social standards to make the country less attractive as a host country
compared to the other member countries. Such competition between the
members may lead to erosion of the welfare state. In order to avoid such a
development, and at the same time preserve the principle that a citizen of the
EU enjoys the same rights everywhere in the Union, it stands to reason to
harmonise the social standards of the member countries. Social policy may thus
become a new object of integration.

The above discussion of the perspectives of the future development in the EU
co-operation illustrates the three dimensions of integration: functional scope,
geographical domain, and institutional capacity (Laursen (1995)). These three
dimensions are illustrated in Figure 8.

Figure 8. The multiface of integration

Source: Own adoption based on Laursen (1995).

Integration in functional scope consists of the transfer of policy areas from
national decision making to decision making at the EU level. Integration in
geographical domain captures the geographical dimension, i.e. the area where
the rules of the integration apply. Finally, integration of institutional capacity

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