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  • Author: Hubert P. Janicki, Thierry Warin, Phanindra Wunnava
  • Publication Date: 06-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: This paper presents an empirical assessment of the endogenous optimum currency area theory. This study relies on the original intuition developed by Mundell in 1973. The gravity model is used to empirically assess the effectiveness of the convergence criteria by examining location specific advantages that guide multinational investment within the European Union. A fixed effects model based on a panel data of foreign direct investment (FDI) flows within the EU-15 shows that horizontal investment promotes the diffusion of the production process across the national border. Specifically, the examined Maastricht criteria suggest convergence in interest rate, government fiscal policy, and debt play a significant role in attracting multinational investment.
  • Topic: Economics, International Political Economy, International Trade and Finance
  • Political Geography: Europe
  • Author: Thierry Warin
  • Publication Date: 06-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The paper addresses the question of the fiscal perspectives within the Economic and Monetary Union (EMU). By using a panel data analysis associated with an interpretation in terms of differences instead of levels, the results show a steady convergence of public deficits across the EMU, and that the EMU needs either to comply with the Lisbon agenda, or some kind of a growth strategy, or reduce the interest of the debt in order to regain some fiscal flexibility while abiding by the Stability and Growth Pact (SGP).
  • Topic: International Relations, Debt, Economics
  • Political Geography: Europe
  • Author: David Coates
  • Publication Date: 04-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: New Labour's performance in office–as an orchestrator of economic and social change–is situated against, and evaluated by reference to, two sets of legacies: legacies inherited from the years of Conservative political dominance after 1979; and legacies brought to power by New Labour. The paper argues that the first se t of legacies was deep and enduring, and threw a long shadow forward. It argues that the second set of legacies were highly coherent and intellectually informed, but cumulatively involved a diminution in the capacity of the state. The result has been a two-term government that is sufficiently superficially successful to win a third term; but which has yet seriously to transform the legacies it inherited: to our misfortune, and ultimately–in electoral terms–also probably to its own. This paper is based on my study of New Labour's domestic policy–Prolonged Labour: The Slow Birth of New Labour Britain; I have also co-authored a study of New Labour's policy towards Iraq–Blair's War–which was published by Polity Press in 2004.
  • Topic: Civil Society, Economics, Politics
  • Political Geography: Europe
  • Author: Sebastián Royo
  • Publication Date: 04-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The proponents of globalization contend that European countries are now converging on an Anglo-American model of capitalism. Contrary to this prediction, this paper will show that in Spain globalization and EMU have promoted rather than undermined coordination among economic actors. Unable to escape from economic interdependence the Spanish economic actors have developed coordinating capacities at the macro and micro levels to address and resolve tensions between economic interdependence and political sovereignty. In this paper I show that there is at least one more variety than the two–LME and CME–that Hall and Soskice cite and also that it is possible to develop coordination capacities in countries that lack a strong tradition of such capacities. In particular, this paper analyzes the resurgence of national-level social bargaining in Spain in the 1990s. This development was the result of the reorientation of the strategies of the social actors. In a new economic and political context, marked by a process of institutional learning, trade unions have supported social bargaining as a defensive strategy to retake the initiative and influence policy outcomes.
  • Topic: Economics, Globalization, Politics
  • Political Geography: Europe
  • Author: Gerald A. McDermott
  • Publication Date: 04-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: This article examines the political conditions shaping the creation of new institutional capabilities. It analyzes bank sector reforms in the 1990s in three leading postcommunist democracies–Hungary, Poland, and the Czech Republic. It shows how different political approaches to economic transformation can facilitate or hinder the ability of relevant public and private actors to experiment and learn their new roles. With its emphasis on insulating power and rapidly implementing self-enforcing economic incentives, the “depoliticization” approach creates few changes in bank behavior and, indeed, impedes investment in new capabilities at the bank and supervisory levels. The “deliberativ e restructuring” approach fostered innovative, cost-effective monitoring structures for recapitalization, a strong supervisory system, and a stable, expanding bank sector.
  • Topic: International Relations, Economics, Politics
  • Political Geography: Europe, Eastern Europe, Poland, Hungary
  • Author: Stanislav Markus
  • Publication Date: 03-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The literature on corporate governance in Russia stresses the abuse of shareholder rights in the face of various asset-diversion tactics by the management. Attributing this fiasco to a number of structural obstacles and the privatization legacy, the orthodox account fails to incorporate–let alone explain–the recent data demonstrating a qualitative improvement of corporate governance in crucial segments of the Russian economy. This paper disaggregates “corporate governance” into specific institutions and examines their quality at the firm level as well as by sector. The data supporting the analysis is drawn from recent studies by the OECD, UBS Warburg, CEFIR, and other organizations. The causal inference presented in this paper critically evaluates the impact of foreign capital on the improved corporate governance in Russia's blue-chip firms. The paper presents two alternative state-centered scenarios to explain the implementation of internationally accepted standards of corporate governance by Russia's big business.
  • Topic: Economics, International Trade and Finance, Politics
  • Political Geography: Russia, Europe, Asia
  • Author: Reimut Zohlnhöfer, Herbert Obinger
  • Publication Date: 03-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The 1990s have witnessed unprecedented attempts at privatizing state owned enterprises in virtually all OECD democracies. This contribution analyzes the differences in the privatization proceeds raised by EU and OECD countries between 1990 and 2000. It turns out that privatizations are part of a process of economic liberalization in previously highly regulated economies, as well as a reaction to the fiscal policy challenges imposed by European integration and the globalization of financial markets. In addition, institutional pluralism and union militancy yield significant and negative effects on privatization proceeds. Partisan differences only emerge if economic problems are moderate, while intense economic, particularly fiscal, problems foreclose differing partisan strategies.
  • Topic: Economics, Globalization, Politics
  • Political Geography: Europe
  • Author: Duane Swank
  • Publication Date: 03-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: I offer an explanation for the widespread diffusion of neoliberal tax policies in the developed democracies. Specifically, I argue that the highly visible 1980s market-conforming tax reform in the United States, the late twentieth century's dominant political economy, creates significant incentives for adoption of neoliberal tax policies by decision makers in other polities. As such, I stress a dominant actor model of the diffusion of neoliberalism that is grounded in asymmetric competition for mobile assets and policy learning. However, while the incentives to follow U.S. tax policy are substantial, the relative weight assigned the costs and benefits of reform and, in turn, the pace and degree of neoliberal policy adoption by other nations is fundamentally contingent on features of domestic political and economic environments. I assess these arguments with empirical models of 1981-to-1998 tax rates on capital in sixteen nations. I find that changes in U.S. tax policy influence subsequent reforms in other polities; in the long-term, all nations move toward the U.S. neoliberal tax structure. Analysis also shows, however, that the responsiveness to US tax reforms is notably greater where linkages with U.S. markets are stronger, where domestic economic stress is deeper, and where uncoordinated market institutions are dominant. I conclude with a discussion of the implications of the present analysis for the volume's central questions: are dominant. I conclude with a discussion of the implications of the present analysis for the volume's central questions: of international policy interdependence and domestic political economic forces in shaping policy change?
  • Topic: Economics, Politics
  • Political Geography: United States, Europe
  • Author: Daniele Archibugi, Alberto Coco
  • Publication Date: 01-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The paper discusses the condition and perspective of the European Union in the knowledge economy and the feasibility of the goal given by the European Council at the Summits held in Lisbon (March 2000) and Barcelona (March 2002), that is, to increase European R expenditure up to 3 percent of GDP by 2010. The paper focuses on two aspects: comparative performance with its direct counterparts, in particular the US..; and intra-European distribution of resources and capabilities. A set of technological indicators is presented to show that Europe is still in a consistent delay when compared to Japan and the U.S., especially in R investment and in the generation of innovations. A small convergence occurs in the diffusion of Information and Communication Technologies (ICTs), the sector most directly linked to the concept of the "new economy." In the field of knowledge collaboration, Europe reveals opposing paths in the business and in the academic worlds. Within Europe, the level of investment in scientific and technological activities is so different across countries that it does not merge into a single continental innovation system.
  • Topic: International Relations, Economics, Science and Technology
  • Political Geography: Europe, Lisbon
  • Author: David R. Cameron
  • Publication Date: 02-2005
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The accession of ten new member states in May 2004 and the prospective accession of several more in the near future will pose severe budgetary, administrative, and operational challenges for the European Union. But however great, the challenges of enlargement pale in comparison with the challenges of accession that will be faced by the new member states, especially those which until a decade ago were governed by Communist parties that presided over centrally-planned and predominantly-collectivized economies. This paper explores five of the most critical challenges that will face the new member states of post-Communist Europe: 1) administering the acquis; 2) deepening and extending the reform and transformation of the economy; 3) reducing the high levels of unemployment and large government, trade, and current account deficits; 4) financing accession in the face of the EU’s budgetary constraints and financial provisions; and 5) coping with all of those challenges in the face of low levels of support for enlargement in many of the member states and high levels of ambivalence and skepticism about membership in most of the new member states. The chapter concludes by noting the low levels of trust in the national government and satisfaction with the way democracy works that exist in most of the new member states and suggests that those low levels of trust and satisfaction will make it difficult for the governments in the new member states to address these challenges while also maintaining sufficient public support to retain office.
  • Topic: Economics, Government
  • Political Geography: Europe
  • Author: Anna Grzymala-Busse
  • Publication Date: 12-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: Theories of institutional development have tended to view discretion, or the leeway to act within institutional bounds, as an often unintended consequence of agency design and institutional specification. Yet the post-communist states show that discretion is a fundamental goal of institutional creation among competing elites. In turn, while political competition has been identified as a key constraint on discretion in institutional creation, widely-used indicators of political competition are inadequate. As post-communist democracies show, the number or seat share of political parties matters far less than what parties do in parliament. The key factor is a robust opposition: a clear, credible, and contentious threat to governing parties. Such opposition leads to the rise of formal institutions that both minimize the discretion necessary for rent-seeking, and favor equitable distributional outcomes.
  • Topic: Economics, Government
  • Political Geography: Europe
  • Author: Daniele Archibugi
  • Publication Date: 12-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: Will Kymlicka has argued “democratic politics is politics in the vernacular.” Does it imply that democratic politics is impossible in a multilingual community, whether at the local, national, regional or global level? This paper discusses this assumption and maintains that democratic politics should imply the willingness of all players to make an effort to understand each other. Democratic politics imply the willingness to overcome the barriers to mutual understanding, including the linguistic ones. Any time that there is a community of fate, a democrat should search for methods that allow deliberation according to the two key conditions of political equality and participation. If linguistic diversity is an obstacle to equality and participation, some methods should be found to overcome it, as exemplified by the Esperanto metaphor. The paper illustrates the argument with four cases of multi-linguistic political communities: a) a school in California with English-speaking and Spanish-speaking students; b) the city of Byelostok in the second half of the nineteenth century, where four different linguistic communities (Polish, Russian, German and Yiddish) coexisted. This led Markus Zamenhof to invent Esperanto; c) the linguistic problems of the Indian state, and the role played by English – a language unspoken by the majority of the Indian population in 1947 – in developing Indian democracy; and d) the case of the European Parliament, with twenty languages and a wealth of interpreters and translators.
  • Topic: Democratization, Economics, Politics
  • Political Geography: Russia, Europe, India, California, Germany
  • Author: Bo Rothstein, Eric M. Uslaner
  • Publication Date: 12-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The importance of social trust has become widely accepted in the social sciences. A number of explanations have been put forward for the stark variation in social trust among countries. Among these, participation in voluntary associations received most attention. Yet, there is scant evidence that participation can lead to trust. In this paper, we shall examine a variable that has not gotten the attention we think it deserves in the discussion about the sources of generalized trust, namely equality. We conceptualize equality in two dimensions: one is economic equality and the other is equality of opportunity. The omission of both these dimensions of equality in the social capital literature is peculiar for several reasons. One is that it is obvious that the countries that score highest on social trust also rank highest on economic equality, namely the Nordic countries, the Netherlands, and Canada. Secondly, these are countries that have put a lot of effort in creating equality of opportunity, not least in regard to their policies for public education, labor market opportunities and (more recently) gender equality. The argument for increasing social trust by reducing inequality has largely been ignored in the policy debates about social trust. Social capital research has to a large extent been used by several governments and policy organizations to send a message to people that the bad things in their society are caused by too little volunteering. The policy implication that follows from our research is that the low levels of trust and social capital that plague many countries are caused by too little government action to reduce inequality. However, many countries plagued by low levels of social trust and social capital may be stuck in what is known as a social trap. The logic of such a situation is the following. Social trust will not increase because massive social inequality prevails, but the public policies that could remedy this situation cannot be established precisely because there is a genuine lack of trust. This lack of trust concerns both “other people” and the government institutions that are needed to implement universal policies.
  • Topic: Civil Society, Economics, Gender Issues
  • Political Geography: Europe, Canada, Netherlands
  • Author: Dorothee Bohle, Bela Greskovitz
  • Publication Date: 05-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: During the past decade of European economic integration vastly worse standards have emerged in work conditions, industrial relations, and social welfare in Eastern Europe than in the West. Area scholars explain this divide by labor weakness caused by the ideological legacy of communism, and do not problematize the impact of transnational capital. In contrast, this essay argues that the reason why the European social model has not traveled to the East is that its socio-economic foundations, the industrial building blocks of the historical compromise between capital and labor, have not traveled either. In the West, the compromise had been rooted in capital-intensive consumer durables industries, such as car-manufacturing, and their suppliers. These sectors brought together organized and vocal labor with businesses willing to accommodate workers' demands, because for them labor had been less a problem as a cost-factor and more important as factor of demand. However, the main driving force of the eastward expansion of European capital has been the relocation of labor-intensive activities where business relies on sweating masses of workers, whose importance as consumers is marginal, and who are weak in the workplace and the marketplace. With this general conceptualization of how the emerging new European division of labor constrains the social aspects of East European market societies as a background, the essay studies the cases of Hungarian electronics and Slovak car industries in order to better understand how particular features of various leading sectors mediate the general pattern.
  • Topic: Economics, Government, Human Welfare
  • Political Geography: Europe, Eastern Europe
  • Author: Sebastian Royo
  • Publication Date: 05-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: The purpose of this paper is to outline the main consequences for Portugal and Spain of EU integration. It uses the integration of Portugal and Spain into the European Union as an opportunity to draw some lessons that may be applicable to East European countries as they pursue their own processes of integration into the European Union. It examines challenges and opportunities that new member states from central and Eastern Europe will face when trying to integrate in the EU. Finally, the paper analyzes the impact the 2004 enlargement will have on the Iberian countries.
  • Topic: Economics, Government
  • Political Geography: Europe, Spain
  • Author: Claes H. de Vreese
  • Publication Date: 05-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: This study tests competing hypotheses about popular support for European integration. It introduces anti-immigration sentiments as a key variable for understanding reluctance towards integration. Drawing on survey data, it is found that anti-immigration sentiments, economic considerations, and the evaluation of domestic governments are the strongest predictors of both support for integration and individuals' propensity to vote “Yes” in a referendum on the enlargement of the EU. When extrapolating the findings to future referendums on issues of European integration, it may be predicted that such referendums will result in a “No” outcome under the conditions of high levels of anti-immigration sentiments, pessimistic economic outlooks, and/or unpopularity of a government.
  • Topic: International Relations, Economics, Government, Politics
  • Political Geography: Europe
  • Author: Andrew Martin
  • Publication Date: 07-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: This paper will be a chapter in Euros and Europeans: Monetary Integration and the European Social Model, Andrew Martin and George Ross, eds., Cambridge University Press, 2004. Over time, the impact of EMU on the European social model (ESM) is likely to depend most fundamentally on its effects on unemployment. If EMU makes possible a significant reduction in unemployment, it poses no threat to the ESM. However, EMU is likely to keep unemployment at high levels. This expectation hinges on two propositions: 1) in order to bring unemployment back down after an extended period of disinflation has kept growth below its potential and unemployment high, a period of economic growth above its long-run potential – a growth spurt – is necessary, and 2), the EMU macroeconomic policy regime, as interpreted and implemented by the ECB, blocks such a growth spurt. The first part of the paper describes the policy regime, arguing that the ECB's implementation of it so far and the bank's rationale for doing so indicate an unwillingness to permit the growth spurt needed to significantly reduce unemployment. Its rationale invokes the orthodox view that monetary policy has no long run effects on growth and employment. This view is challenged by an alternative view, described in the second part. The alternative rests mainly on an empirical analysis of cases in which disinflation was and was not followed by growth spurts during the 1980s and 1990s. Showing that in the long run unemployment was lower without higher inflation where monetary policy permitted growth spurts than where it did not, this analysis suggests that the ECB's orthodoxy is fundamentally flawed and that adherence to it will perpetuate Europe's high unemployment.
  • Topic: Economics, Human Welfare, Politics
  • Political Geography: Europe
  • Author: Michael J. Oliver, Hugh Pemberton
  • Publication Date: 05-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: Despite considerable interest in the means by which policy learning occurs, and in how it is that the framework of policy may be subject to radical change, the “black box” of economic policymaking remains surprisingly murky. This article utilizes Peter Hall's concept of “social learning” to develop a more sophisticated model of policy learning; one in which paradigm failure does not necessarily lead to wholesale paradigm replacement, and in which an administrative battle of ideas may be just as important a determinant of paradigm change as a political struggle. It then applies this model in a survey of UK economic policymaking since the 1930s: examining the shift to “Keynesianism” during the 1930s and 1940s; the substantial revision of this framework in the 1960s; the collapse of the “Keynesian-plus” framework in the 1970s; and the major revisions to the new “neo-liberal” policy framework in the 1980s and 1990s.
  • Topic: Economics, Industrial Policy, International Trade and Finance
  • Political Geography: United Kingdom, Europe
  • Author: Katerina Linos
  • Publication Date: 01-2004
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: How can international organizations shape national welfare states? The answer depends on why national governments comply with international organization mandates. International relations scholarship offers two competing compliance models. Enforcement theories emphasize states' utilitarian calculus and predict that states' policy preferences determine implementation, while managerial theories attribute non-compliance to states' capability limitations and emphasize institutional variables. This paper examines the implementation of EU social policy directives through a new quantitative dataset and qualitative case studies of implementation in Greece and Spain. Three proxies for national social policy preferences – low labor costs, high unemployment and early national social legislation – predict implementation delays. At the same time, factors unrelated to national preferences on particular directives have at least as large an impact on timely implementation. Thus, a national bureaucracy's capacity and the absence of veto players reduce implementation delays. These findings suggest that capabilities influence compliance at least as much as preferences, but through mechanisms different from the ones emphasized in existing work. Although international organizations may not be especially successful in overcoming past policy legacies in favor of future commitments, they can reorient the axes of contestation from left-right to supra-sub national and thus shape national policies.
  • Topic: Economics, Globalization, International Organization
  • Political Geography: Europe
  • Author: Iain Begg
  • Publication Date: 07-2003
  • Content Type: Working Paper
  • Institution: Minda de Gunzburg Center for European Studies, Harvard University
  • Abstract: Although the launch of the euro went better than many expected, sluggish growth, persistent unemployment and growing disenchantment with key elements of the economic governance system have led to demands for change, especially in policy coordination. This paper examines the criticisms of economic policy in the EU and the mechanisms through which it is coordinated, and considers how the EMU policy system might be reformed. It points to problems and paradoxes in the way economic governance operates, notably those surrounding its ability to deliver a coherent policy mix that brings together monetary fiscal and supply-side policies. The paper concludes with a discussion of whether gouvernment économique might offer a way forward.
  • Topic: Economics, International Political Economy
  • Political Geography: Europe