| Abstract: | In the run-up to the formation of the EC Single Market in 1992, all border controls for intra-EC trade will cease to exist. In this paper we are asking which of the discretionary-budget-maximizing governments will benefit or lose from this institutional change.The elimination of border controls leaves governments with four options of adjustment. Each of these alternatives is addressed, following the presentation of a very simple politico-economic general equilibrium model. As the main conclusion, it turns out that only the centralisation of taxing power on a supranational level can under certain conditions increase the discretionary benefit of governments. |
