The Industrial Organization of International Bureaucracies: National Chiefdoms within International Organizations

Abstract

This paper presents a transaction cost-based theory of informal spheres of national influence. It is based on the assumption that sometimes diversity of interests among states, instead of impeding control, creates gains from exchange in terms of controlling different aspects of the international organization’s output. Drawing on distributive models of Congress, which show that rather than trading votes in an explicit market, legislators exchange property rights over their most preferred policy jurisdictions, it is argued that states sustain complex political exchanges by granting one another agenda control over their most preferred subdivisions within the international organization. As a result, these organizations exhibit informal spheres of national influence. The theory has two implications that the paper evaluates. First, member states grant one another agenda control over their most preferred subdivisions. Therefore, we would expect national chiefdoms to be controlled by preference outliers with strong interests in the subdivision’s policy. Second, since the existence of multiple dimensions and issues is a precondition for states to reap gains from political exchange, single-dimensional international organization provide fewer opportunities for these deals. Therefore, single-dimensional international organizations should be less likely to develop national chiefdoms than organizations that comprise multiple policy areas. The findings have important implications for the literature on international organization and Principal-Agent models in particular.