Economic integration and state capacity

Laszlo Bruszt,Nauro F Campos

doi:10.1017/s1744137418000346

Laszlo Bruszt, Nauro F Campos

Open Access

https://doi.org/10.1017/s1744137418000346

Copy DOI

Abstract

AbstractWe investigate whether and how economic integration increases state capacity. This important relationship has not been studied in detail so far. We put together a conceptual framework that highlights what we call the Montesquieu, Weber and Smith channels to guide our analysis. Each of these corresponds to a series of mechanisms in three distinct institutional arenas: judiciary, bureaucracy and competition policy. To test our framework, we introduce a new panel of institutional reform measures that allow us to investigate how changes in these three arenas interact with each other and what sequence of changes yields increases in state capacity. The yearly data set covers all the 17 candidate countries to join the European Union (EU) after the 1995 enlargement. Deep integration, we find, can induce broad institutional change by providing incentives for simultaneous change in core state institutions. Bureaucratic independence and judicial capacity seem to be the key engine of the process engendered by the prospect of EU membership. Yet early and abrupt removal of external anchors might generate significant backsliding, or reversals, in domestic institutional change.

Highlights

The Great Recession and the Eurozone crisis dented the consensus about the economic benefits of European Union (EU) membership
We constructed a conceptual framework (Montesquieu, Weber and Smith channels) and used a new panel data set on the accession process to the European Union of central and eastern European countries
First regarding the bureaucracy, that inputs such as the training and the quality of civil service law positively affect the capacity of the bureaucracy, which in turn affects bureaucratic independence

Summary

Introduction

The Great Recession and the Eurozone crisis dented the consensus about the economic benefits of EU membership. The deeper economic integration is, the more policy fields are regulated by common rules, the higher might be the incentives of actors in the stronger economies to care about states’ capacity in the weaker economies. The dilemma of such externally induced institutional change is, that powerful domestic actors in countries with weak states might benefit enormously from the conservation of the institutional status quo and the potential domestic beneficiaries of state reform might be too weak to make a difference.

A political economy framework of institutional change

Measurement

Identification and methodology

Empirical results

Findings

Conclusions