Comment on e-book 3 by Koen Algoed

Does it make sense to regionalize labour market institutions ? If so, how? A comment. Koen ALGOED HuBrussel & VIVES, K.U.Leuven 30 April 2009 The fact that unemployment benefits are paid and personal income taxes and social security contributions are raised at the federal level while a number of policies such as labour market integration and education are a regional competence raises a conflict of interest between the federal government and the Regions. Regional policies affect the level of expenditures on unemployment benefits and tax revenues but the Regions do not collect the full proceeds of their actions. Hence they tend to under-invest, for instance in labour market integration and education. The authors of the E-book argue that incentive contracts are required to resolve these problems of conflicting interests. This is a refreshing and more promising approach in the debate on regionalization of labour market institutions compared with the approach that argues that Regions need more coherent packages of instruments to fight the regional-specific unemployment and the ageing problems. In a multilevel state some level of overlap of expenditure competences between national and subnational governments is somehow unavoidable. Therefore, the coherence of competence packages should not be such a big issue in the proposals for another state reform in our country. On the contrary, the debate should focus on coordination mechanisms and the lack ...