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Department of Political and Social Sciences Department of Political and Social Sciences 1 Varieties of Backyard Management EU Integration and the Evolution.

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Presentation on theme: "Department of Political and Social Sciences Department of Political and Social Sciences 1 Varieties of Backyard Management EU Integration and the Evolution."— Presentation transcript:

1 Department of Political and Social Sciences Department of Political and Social Sciences 1 Varieties of Backyard Management EU Integration and the Evolution of Economic State Capacities in the Southern and Eastern Peripheries of Europe Laszlo Bruszt and Visnja Vukov European University Institute, June 2013

2 Department of Political and Social Sciences Department of Political and Social Sciences Backyard management Strategies of integrating the economies of the countries of the periphery by core countries –extending rules/imposing policies –dealing with developmental externalities of integration 2

3 Department of Political and Social Sciences Department of Political and Social Sciences Patterns of backyard management “Integrating Rule Takers” EU – NAFTA comparison (with McDermott, G. in Review of International Political Economy 2012) –Broad policy goals combined with extensive capacity building –Massive multiplex assistance and monitoring –Joint problem-solving instead of checklist compliance 3

4 Department of Political and Social Sciences Department of Political and Social Sciences Patterns of backyard management European East-South comparison: –Literature focuses on effects and much less on strategies –In common: perception of problems in competitiveness –Diverging: EU strategies of economic integration 4

5 Department of Political and Social Sciences Department of Political and Social Sciences Export share in world markets Share in total world merchandise exports 19951997199920012003200520072008 Visegrad0.320.340.390.450.550.620.740.77 Baltic and Balkan0.070.080.070.090.110.120.140.15 South0.850.810.82 0.880.790.780.75 5

6 Department of Political and Social Sciences Department of Political and Social Sciences 6 Exports – sectoral breakdown Exports in % of GDP19952007 Total AgricultureIndustryServices Visegrad43.564.03.851.48.8 Baltics and Balkan47.655.75.637.512.7 South22.325.52.112.511.1

7 Department of Political and Social Sciences Department of Political and Social Sciences 7 Exports structure Complex exports in total goods exports (%) Share of medium and high-tech in total exports (%) 1995200719952005 Visegrad345942.863.8 Baltics and Balkan273238.243.9 South323934.049.0

8 Department of Political and Social Sciences Department of Political and Social Sciences 8 Inward FDI stock – sectoral breakdown Inward FDI stock in % of GDP 19952007 Total ManufacturingServices Visegrad12.457.820.628.8 Baltic and Balkan7.755.911.536.5 South14.435.97.424.3

9 Department of Political and Social Sciences Department of Political and Social Sciences Fostering competitiveness in the peripheries State policies (1995-2007) –Tax policies –Labor market flexibility –Welfare cuts –State aid, education, R&D 9

10 Department of Political and Social Sciences Department of Political and Social Sciences 10 State transformation – evolution of policies 1 2007Corporate tax VAT in total revenue Horizontal aid Labour rigidityEducationWelfare Visegrad18.6821.450.831.7410.6218.79 Baltic & Balkan14.0827.440.212.4412.6113.15 South26.619.300.243.0610.6121.32 EU Average22.1821.080.382.211.5020.98

11 Department of Political and Social Sciences Department of Political and Social Sciences State transformation - evolution of policies 2 Change (in %) between 1995 and 2007 Corporate tax Share of VAT in total revenues Horizontal aid Labour rigidityEducationWelfare Visegrad-34.75+17.05+103.68+9.09+14.66-0.99 Baltic & Balkan-41.24+9.32+2.94-0.81+2.45-3.87 South-20.36+5.85-33.94-19.69+14.05+3.31 EU Average-23.29+10.27+13.40-14.35+6.16-7.27 11

12 Department of Political and Social Sciences Department of Political and Social Sciences Government spending on research and development Government sector R&D spending1995199619971998199920002001200220032004200520062007 Visegrad0.250.260.220.230.22 0.210.250.240.230.220.23 Baltic & Balkan0.260.240.22 0.210.180.17 0.180.17 South0.130.150.130.16 0.15 0.13 0.14 0.15 12

13 Department of Political and Social Sciences Department of Political and Social Sciences Fostering competitiveness in the peripheries High Road: Visegrad Countries –Tax reforms –Labor market flexibility –State Aid, R&D 13

14 Department of Political and Social Sciences Department of Political and Social Sciences Fostering competitiveness in the peripheries Low Road: Baltic countries and the Balkans –Tax reforms –Labor market flexibility 14

15 Department of Political and Social Sciences Department of Political and Social Sciences Fostering competitiveness in the peripheries No Road: South –Neither the low nor the high road –Cuts in State Aid, increase in welfare spending 15

16 Department of Political and Social Sciences Department of Political and Social Sciences The main elements of the EU strategies South: Competitiveness is a domestic issue, focus on incentives –limited pre-accession conditionality –focus on EMU and Maastricht criteria –Post-accession assistance /Cohesion policies/ 16

17 Department of Political and Social Sciences Department of Political and Social Sciences The main elements of the EU strategies East: Competitiveness is an EU issue, focus on institutions –Extensive and deep pre-accession conditionality, ex-ante regulatory integration –Functioning market economy with the capacity to withstand competitive pressure –Extensive and multiplex pre-accession assistance 17

18 Department of Political and Social Sciences Department of Political and Social Sciences Monetary integration Assumed to create pressures on states to implement ‘structural reforms’ and reorient their policies towards increasing competitiveness Empirics show that monetary integration had exactly the opposite effect (Duval, Vukov) 18

19 Department of Political and Social Sciences Department of Political and Social Sciences Cohesion programs Goal: Strengthen developmental state capacity by empowering sub-national actors In reality: weakness of sub-national actors strengthened the control of central authorities over funds distribution which served as free rents, reducing incentives to institutional change 19

20 Department of Political and Social Sciences Department of Political and Social Sciences Copenhagen criteria Complex institution building aimed at decreasing potential negative externalities of economic integration –Ex-ante regulatory integration – reduction of domestic rent-seeking alliances –State building: administrative, regulatory and developmental capacities 20

21 Department of Political and Social Sciences Department of Political and Social Sciences Summary Effects of EU strategies South: getting the incentives wrong East: getting the institutions right No homogenization No learning 21

22 Department of Political and Social Sciences Department of Political and Social Sciences Summary – NSE&TE Against methodological nationalism: Domestic institutional change is embedded in regional (and global) political settings Most of the transition economies are rule takers Need to better understand regional/global effects 22


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