state transformations in oecd countries: dimensions, driving forces and trajectories

Transformations of the State

Series Editors: Achim Hurrelmann, Carleton University, Canada; Stephan Leibfried, University of Bremen, Germany; Kerstin Martens, University of Bremen, Germany; Peter Mayer, University of Bremen, Germany.

Titles include:

Joan DeBardeleben and Achim Hurrelmann (editors)DEMOCRATIC DILEMMAS OF MULTILEVEL GOVERNANCELegitimacy, Representation and Accountability in the European Union

Achim Hurrelmann, Stephan Leibfried, Kerstin Martens and Peter Mayer (editors)TRANSFORMING THE GOLDEN-AGE NATION STATE

Achim Hurrelmann, Steffen Schneider and Jens Steffek (editors)LEGITIMACY IN AN AGE OF GLOBAL POLITICS

Lutz Leisering (editor)THE NEW REGULATORY STATERegulating Pensions in Germany and the UK

Kerstin Martens, Philipp Knodel and Michael Windzio (editors)INTERNATIONALIZATION OF EDUCATION POLICYA New Constellation of Statehood in Education?

Kerstin Martens, Alexander-Kenneth Nagel, Michael Windzio and Ansgar Weymann (editors)TRANSFORMATION OF EDUCATION POLICY

Kerstin Martens, Alessandra Rusconi and Kathrin Leuze (editors)NEW ARENAS OF EDUCATION GOVERNANCEThe Impact of International Organizations and Markets on Educational Policy Making

Steffen Mau, Heike Brabandt, Lena Laube and Christof RoosLIBERAL STATES AND THE FREEDOM OF MOVEMENTSelective Borders, Unequal Mobility

Christof RoosTHE EU AND IMMIGRATION POLICIESCracks in the Walls of Fortress Europe?

Heinz Rothgang, Mirella Cacace, Simone Grimmeisen, Achim Schmid and Claus WendtTHE STATE AND HEALTHCAREComparing OECD Countries

Steffen Schneider, Achim Hurrelmann, Zuzana Krell-Laluhová, Frank Nullmeier and Achim WiesnerDEMOCRACY’S DEEP ROOTSWhy the Nation State Remains Legitimate

Peter StarkeRADICAL WELFARE STATE RETRENCHMENTA Comparative Analysis

Peter Starke, Alexandra Kaasch and Franca van Hooren (editors)THE WELFARE STATE AS CRISIS MANAGERExplaining the Diversity of Policy Responses to Economic Crisis

Silke WeinlichTHE UN SECRETARIAT’S INFLUENCE ON THE EVOLUTION OF PEACEKEEPING

Hartmut Wessler (editor)PUBLIC DELIBERATION AND PUBLIC CULTUREThe Writings of Bernhard Peters, 1993–2005

Hartmut Wessler, Bernhard Peters, Michael Brüggemann, Katharina Kleinen-von Königslöw and Stefanie Sifft TRANSNATIONALIZATION OF PUBLIC SPHERES

Jochen Zimmermann and Jörg R. WernerREGULATING CAPITALISM?The Evolution of Transnational Accounting Governance

Jochen Zimmermann, Jörg R. Werner and Philipp B. Volmer GLOBAL GOVERNANCE IN ACCOUNTINGPublic Power and Private Commitment

Transformations of the StateSeries Standing Order ISBN 978–1–4039–8544–6 (hardback) 978–1–4039–8545–3 (paperback)

You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and the ISBNs quoted above.

Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England

State Transformations in OECD CountriesDimensions, Driving Forces and Trajectories

Edited by

Heinz RothgangProfessor of Health Economics and Director of the Division of Health Economics, Health Policy and Outcomes Research, Centre for Social Policy Research, University of Bremen, Germany

Steffen SchneiderSenior Research Fellow, Centre for Social Policy Research, University of Bremen, Germany

Editorial matter, introduction, conclusion and selection © Heinz Rothgang and Steffen Schneider 2015

Individual chapters © Contributors 2015

All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission.

No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS.

Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages.

The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988.

First published 2015 by PALGRAVE MACMILLAN

Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire, RG21 6XS.

Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010.

Palgrave is the global academic imprint of the above companies and has companies and representatives throughout the world.

Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries.

This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin.

A catalogue record for this book is available from the British Library.

A catalog record for this book is available from the Library of Congress.

ISBN 978-1-349-43659-0 ISBN 978-1-137-01242-5 (eBook)

DOI 10.1057/9781137012425

Softcover reprint of the hardcover 1st edition 2015 978-1-137-01241-8

Contents

List of Figures vii

List of Tables ix

Preface and Acknowledgements x

Notes on Contributors xii

Part I Introduction 1

1 Explaining State Transformations: A Framework 3Steffen Schneider and Heinz Rothgang

Part II Resource Dimension: The Territorial State 17

2 The Rise and Decline of Public Enterprises in Western Democracies 19Carina Schmitt and Herbert Obinger

3 The Competing State: Transformations of the Public/ Private Sector Earnings Gap in Four Countries 41Markus Tepe, Bernhard Kittel and Karin Gottschall

4 The Evolving Post-national Regulation of Financial Reporting 67Jörg R. Werner and Jochen Zimmermann

Part III Legal Dimension: The Rule of Law 85

5 The Effects of International Dispute Settlement Procedures 87Aletta Mondré

6 Internationalizing Law against the Odds: The Power of Courts and Their Limits 107Susanne K. Schmidt, Michael Blauberger and Tilman Krüger

7 Explaining the Transnationalization of Commercial Law 127Gralf-Peter Calliess, Hermann B. Hoffmann and Jens Michael Lobschat

Part IV Legitimacy Dimension: Democracy 143

8 Cultures of Political Discourse in Europe: Explaining Multiple Segmentation in the European Public Sphere 145Andreas Hepp, Katharina Kleinen-von Königslöw, Swantje Lingenberg, Johanna Möller, Michael Brüggemann and Anke Offerhaus

vi Contents

9 Internationalization and the Discursive Legitimation of the Democratic Nation State 167Sebastian Haunss, Henning Schmidtke and Steffen Schneider

Part V Welfare Dimension: State Intervention 187

10 Pioneers of Paradigmatic Change? Welfare State Restructuring in Small Open Economies 189Peter Starke and Herbert Obinger

11 Policy Change in Secondary Education: Germany and England Compared 207Philipp Knodel, Kerstin Martens and Dennis Niemann

12 The Hybridization of Healthcare Regulation: An Explanation in Cross-national Perspective 223Lorraine Frisina Doetter, Ralf Götze, Achim Schmid, Mirella Cacace and Heinz Rothgang

Part VI Conclusion 247

13 The Democratic Nation State – Victim or Master of Transformations? 249Steffen Schneider and Heinz Rothgang

Bibliography 265

Index 305

vii

List of Figures

1.1 A heuristic for the explanation of state transformations 13

2.1 Conceptualization of formal and substantial privatization 28

2.2 Levels of public entrepreneurship in 20 countries, 1980–2007 29

2.3 Change in public entrepreneurship, 1980–2007 30

2.4 Privatization trajectories in public utilities 32

3.1 Stylized changes in public/private sector labour income differentials 44

3.2 Quantile regression results, public/private wage differentials, Germany 55

3.3 Quantile regression results, public/private wage differentials, France 56

3.4 Quantile regression results, public/private wage differentials, Sweden 57

3.5 Quantile regression results, public/private wage differentials, United States 58

3.6 Juhn-Murphy-Pierce decomposition, public/private wage differentials, Germany 59

3.7 Juhn-Murphy-Pierce decomposition, public/private wage differentials, France 60

3.8 Juhn-Murphy-Pierce decomposition, public/private wage differentials, Sweden 61

3.9 Juhn-Murphy-Pierce decomposition, public/private wage differentials, United States 62

6.1 ECJ judgements on the free movement of capital 117

8.1 Explaining the multiply segmented European public sphere 148

8.2 Levels of vertical and horizontal Europeanization, quality and tabloid newspapers 151

9.1 Positive and negative assessments by country (N, legitimacy levels) 176

9.2 Legitimacy levels per country over time 176

viii List of Figures

9.3 Legitimacy levels of democratic input and other criteria over time 179

9.4 Shares of internationalization frames over time (%) 181

9.5 Legitimacy levels of internationalization frames per country over time 183

12.1 An explanatory framework of healthcare system change 226

ix

List of Tables

2.1 Determinants of privatization 34

2A.1 Public Entrepreneurship Index 38

3.1 Composition of public employment 47

3.2 Determinants of public employment 52

3.3 Oaxaca-Blinder decomposition of labour income differentials 54

3A.1 Definition and coding of variables 63

3A.2 Descriptive statistics 64

5.1 Effects of different IDSPs on compliance 103

8.1 Varieties of nationalization practices 158

8.2 Transnational types of addressing newspaper audiences 162

9.1 Time windows and numbers of legitimation statements 174

9.2 Legitimation grammar and examples 175

x

Preface and Acknowledgements

Without a doubt, the modern OECD state – the TRUDI state in the termi-nology of the Transformations of the State Research Centre (TranState) at the University of Bremen, whose research we synthesize here – has been transformed in major ways over the past four decades.1 While it became obvious with the Great Depression after 2008 that it was premature to sound the death knell for the state, it cannot be denied that the state now shares political authority and co-produces public goods and services – like security, the rule of law, democratic legitimacy and welfare – with other actors, be they international or private, or both. At TranState, which started its work in January 2003 and concluded it in December 2014, we examined the scope and nature of these transformations in roughly 15 comparative empirical projects that focused on different aspects and dimensions of the TRUDI state.

An introduction to TranState’s research concept and an overview of some of its descriptive findings can be found in the Palgrave Transformations of the State series – especially in two synthesis volumes edited by Leibfried and Zürn (2005) and by Hurrelmann et al. (2007). The Palgrave series, with Achim Hurrelmann, Stephan Leibfried, Kerstin Martens and Peter Mayer as series editors, now comprises some 25 volumes. It continues to grow and will remain an open series after 2015.

In the wake of such research efforts, a consensus on the contours and the meaning of state transformations in the West seems to have emerged: Most observers diagnose the ‘unravelling’ of quasi-monopolistic, ‘self-contained’ political authority in the ‘container state’ and the emergence of the ‘open state’ in a new, ‘managerial’ role, embedded in a system of global govern-ance (for two grand retrospectives, see Genschel and Zangl 2014; Levy et al. 2015). The literature, however, is still clearly dominated by more descriptive accounts of state change, or by narratives that attribute state transforma-tions and the convergence of policy regimes in a sweeping fashion to one driving force only, be it ‘globalization’, Europeanization, modernization or technological change.

Our volume moves beyond such stylized accounts in explaining the trans-formations of the TRUDI model. Parts II to V, or Chapters 2 to 12, probe the causal effects and mechanisms that, since the 1970s, have transformed the resource, law, legitimacy and welfare dimensions of the TRUDI state. All chap-ters are based on empirical work carried out at the TranState Research Centre in Bremen, Germany (www.state.uni-bremen.de). TranState was a Centre of Excellence founded in 2003 by the University of Bremen together with the International University Bremen (now Jacobs University) and the University of Applied Sciences, Bremen; TranState later also included researchers based

Preface and Acknowledgements xi

at the University of Oldenburg. The Centre was evaluated and funded for the full cycle of 12 years by the German Research Foundation, or Deutsche Forschungsgemeinschaft, and it united expertise from political science, law, economics and sociology on the topic of state transformations.

We wish to thank all the contributors, the TranState Research Centre and the Palgrave staff for their support in the conclusion of our work and – given the lengthy production process of the present volume – for their patience. Special thanks go to Achim Schmid for his assistance in the assembly of the book and, especially, to Vicki May, Susan Gaines and Stephan Leibfried for their scrupulous and patient proofreading, the very thorough editing of some of the English language manuscripts and other support for this undertaking.

At the University of Bremen, our thanks go to the University manage-ment under the old leadership of Gerd Rüdiger Kück and Wilfried Müller (from TranState’s inception until 2012) and to the new leadership of Martin Mehrtens and Bernd Scholz-Reiter (since 2012) for their continu-ous and dependable support. Without creative support at the central level, research undertakings like these – comprising, at any one time, some 80 people or more who are expected to ‘deliver’ just in time and hence requir-ing a skilful blend of orthodox and unorthodox measures to move through three evaluations, three four-year employment phases and the phasing-out period – would be impossible. Such ‘moving targets’ need reliable backing, and – a true miracle – we have always been able to rely on it. Without this support, Bremen’s promotion in 2012 into the league of Germany’s top 11 ‘Universities of Excellence’ and the additional federal funding that came with it would not have materialized nor would it endure.

Heinz Rothgang and Steffen Schneider

Note

1 TRUDI is an acronym that stands for ‘a multifunctional state that combines the Territorial State, the state that secures the Rule of Law, the Democratic State, and the Intervention state’ (Zürn and Leibfried 2005, 3).

xii

Notes on Contributors

Michael Blauberger is Assistant Professor for European Politics and Political Theory, University of Salzburg, Austria.

Michael Brüggemann is Professor of Media and Communication Studies at the University of Hamburg, Germany.

Mirella Cacace is a Senior Research Fellow at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Gralf-Peter Calliess is Professor of Law and Director of the Centre for Transnational Studies (ZenTra), University of Bremen, Germany.

Lorraine Frisina Doetter is a Senior Research Fellow at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Karin Gottschall is Professor of Sociology and Director of the ‘Gender Politics in the Welfare State’ Division at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Ralf Götze is a division chief at the GKV-Spitzenverband (the umbrella asso-ciation of German public health insurance companies).

Sebastian Haunss is a Senior Research Fellow at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Andreas Hepp is Professor of Media and Communication Studies at the Centre for Media, Communication and Information Research (ZeMKI), University of Bremen, Germany.

Hermann B. Hoffmann is a lawyer with CMS Hasche Sigle, Berlin, Germany.

Bernhard Kittel is Professor for Economic Sociology and Director of the Institute for Economic Sociology at the University of Vienna, Austria.

Katharina Kleinen-von Königslöw is Professor of Political Communication at the University of Zurich, Switzerland.

Philipp Knodel is co-founder of the education start-up App Camps.

Notes on Contributors xiii

Tilman Krüger is a Senior Research Fellow at the Institute for Intercultural and International Studies (InIIS), University of Bremen, Germany.

Swantje Lingenberg was a Research Associate at the TranState Research Centre, University of Bremen, Germany, from 2008 to 2014.

Jens Michael Lobschat (Mertens) is a judge at the Higher Regional Court of Oldenburg, Germany.

Kerstin Martens is Professor of International Relations at the Institute for Intercultural and International Studies (InIIS), University of Bremen, Germany.

Johanna Möller was a Research Associate at the TranState Research Centre, University of Bremen, Germany, from 2007 to 2014.

Aletta Mondré is a Research Associate at the Institute of Political Science, University of Duisburg-Essen, Germany.

Dennis Niemann is a Senior Research Fellow at the Institute for Intercultural and International Studies (InIIS), University of Bremen, Germany.

Herbert Obinger is Professor of Comparative Public and Social Policy and Director of the ‘Institutions and History of the Welfare State’ Division at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Anke Offerhaus is a Lecturer at the Centre for Media, Communication and Information Research (ZeMKI), University of Bremen, Germany.

Heinz Rothgang is Professor of Health Economics and Director of the ‘Health Economics, Health Policy and Outcomes Research’ Division at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Achim Schmid was a Research Associate at the TranState Research Centre, University of Bremen, Germany, from 2005 to 2014, and is now an Associate Member of the University’s Centre for Social Policy Research (ZeS).

Susanne K. Schmidt is Professor of Policy Analysis at the Institute for Intercultural and International Studies (InIIS), University of Bremen, Germany.

Henning Schmidtke is a Research Associate at the School of Economics and Political Science, University of Sankt Gallen, Switzerland.

xiv Notes on Contributors

Carina Schmitt is a Senior Research Fellow at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Steffen Schneider is a Senior Research Fellow at the Centre for Social Policy Research (ZeS), University of Bremen, Germany.

Peter Starke is Associate Professor at the Centre for Welfare State Research, Department of Political Science and Public Management, University of Southern Denmark, Denmark.

Markus Tepe is Professor of Political Science at the University of Oldenburg, Germany.

Jörg R. Werner is Professor of Accounting and Director of the Accounting Department at the Frankfurt School of Finance and Management, Germany.

Jochen Zimmermann is Professor of Accounting and Control at the Faculty of Business Studies and Economics at the University of Bremen, Germany.

Part IIntroduction

3

1Explaining State Transformations: A FrameworkSteffen Schneider and Heinz Rothgang

The claim that the end of the Cold War not only brought about the ‘end of history’ – the global triumph of capitalism and liberal democracy (Fukuyama 1992) – but also, and perhaps ironically, the ‘end of the nation state’ was commonplace in the final years of the twentieth century. Today, such obituaries – whether couched in terms of regret (Guéhenno 1995) or of unconcealed joy about the presumptive withering away of the state (Ohmae 1996) – appear rather premature. ‘The reports of my death are greatly exag-gerated’, a very lively Mark Twain (1835–1910) cabled from London to the United States in 1897 – and that also holds for reports on the ‘death of the state’. In the wake of the global financial market and economic crisis after 2008 (Kahler and Lake 2013), the state is now often seen as having experi-enced a spectacular revival, and its return is even hailed by some (Leibfried 2008; Heinze 2009).

This extreme swing of the analytical pendulum between obituaries in the ‘roaring nineties’ (Stiglitz 2004) and sudden resurrection in the new Great Recession of the 2000s is partly due to a lack of precision in the descrip-tion of the state and its transformations. In this volume, we submit that an adequate conceptualization of state change requires, first of all, the concen-tration on a specific historical form of the state – as different state types may undergo different types of change – and, at the same time, a disaggregated view of state dimensions and related governance functions. Moreover, state transformations have to be distinguished from a mere change of government policies. Therefore we focus on the state model that developed in the OECD (Organisation for Economic Co-operation and Development) world during the first three decades after the Second World War – the ‘Golden Age’ of the democratic nation state (Hurrelmann et al. 2007) – and on the transforma-tions experienced by this state type since the 1970s (Leibfried et al. 2015, Part III).

Using this benchmark, it is readily apparent that there have indeed been important transformations of the state and its individual dimensions. Thus we differ from authors who argue that the retreat of the state – the erosion of state

4 Explaining State Transformations: A Framework

autonomy and capacity – is a myth (Weiss 1998; Krasner 2003; Sørensen 2004). Undeniably, the scope and nature of the state and its activities have changed in the last decades. These transformations – as well as their varying scope and nature in different countries and state dimensions – need to be explained. The transformations may notably have been induced by economic globaliza-tion, demographic change or other secular trends (Held et al. 1999; Huber et al. 2015b). The popular conception of a globalization-induced erosion of state functions is, however, inadequate. It seems more accurate to carefully consider the overall picture of emerging ‘global governance’ arrangements in the ‘post-national constellation’ of today’s political world and the state’s role in them (Habermas 2001; Dingwerth and Pattberg 2010; Genschel and Zangl 2014; Leibfried et al. 2015, Part II). The shifts of political authority to interna-tional organizations and regimes or to private and transnational governance arrangements that are implied in the term ‘post-national constellation’ need to be viewed as a complex, multifaceted set of transformations rather than as a mere erosion of state capacity and an across-the-board retreat of the state (Evans 1997; Strange 2009), and by no means as the end of the state (on the internationalization and privatization of political authority, see Barnett and Finnemore 2004; Slaughter 2004; Milner and Moravcsik 2009; Cerny 2010).

In order to provide a framework for the explanation of state change, this chapter first describes what has to be explained, that is, the kinds of state transformations observed in the OECD world in the last decades. Once the question what it is that requires explanation is resolved, we discuss extant literature on the state and identify the major theoretical approaches that may be used to explain its transformations as well as diverging trajectories of stability and change. Based on these theories, we move on to develop an explanatory framework that underpins the remainder of the volume. Such a framework has to avoid the pitfalls of monocausal and deterministic expla-nations; rather, it has to take into account a number of distinct independent and intervening variables. The chapter finishes with an outline of the book.

What is to be explained?

In order to give an accurate picture of state transformations and to clarify the explananda of the following empirical chapters, we turn away from essayistic and overly general approaches to the state per se. Instead, we focus on one particular type of state, namely, the modern state form that developed in Western democracies after the Second World War and flourished until the early 1970s.1 In order to describe this Golden Age state and explain its transformations during the subsequent ‘Silver Age’ (Taylor-Gooby 2002), we first introduce a four-dimensional model of this state type – the ‘TRUDI’ model – which refers to separate dimensions of the modern state and to governance functions assumed, or public goods and services produced, in each of them; we then sketch the transformations of the TRUDI state.

Steffen Schneider and Heinz Rothgang 5

The TRUDI model of the modern state

The modern state arguably has four core functions. First of all, as a sover-eign territorial state (T) it enjoys what Max Weber (1978) famously called the monopoly on the legitimate use of coercion – using the military and the police, and ultimately relying on its largely unchallenged sovereignty (Biersteker 2002), to ensure foreign and domestic security and to extract rev-enue from its population (Tilly 1993). Second, as a constitutional state, it guarantees the rule of (an exclusively nationally embedded) law (RU). Third, as a democratic state, it ensures legitimacy through democratic (D) proce-dures and decision-making institutions. Finally, as a welfare state, it provides for the welfare of the nation through state intervention (I) into economic and social affairs, thus securing efficiency and social justice. Henceforth, we will refer to the resource, law, legitimacy and welfare dimensions of the state and use the TRUDI acronym to denote this particular state form (Leibfried and Zürn 2005, 3; Huber et al. 2015b; Levy et al. 2015).

The most striking characteristic of the TRUDI state in its Golden Age was that the production of goods and services in the outlined dimensions was concentrated at the nation state level; in the OECD world up until the early 1970s, the state therefore had all but a ‘monopoly’ on the production of for-eign and domestic security, the rule of law, the legitimacy of political author-ity and welfare (Deitelhoff and Steffek 2009; Nullmeier 2009).

In the Golden Age, the state’s powerful position and the relative self-containedness of national economies also enabled it to choose among different pathways in assuming its functions. Gøsta Esping-Andersen’s (1990) already classic notion of ‘three worlds of welfare capitalism’ and the even more encompassing ‘varieties of capitalism’ perspective (Hall and Soskice 2001) both underline the variation of governance arrangements and policies that was possible in the TRUDI context. It is not necessary to modify the concept of TRUDI to acknowledge different types of welfare capitalism precisely because the differences correlate with the state’s prominent role in the post-war decades, which in turn was a prerequisite for the welfare regimes and functions that are a key dimension of the TRUDI model. Conversely, the persistence of varying welfare regimes may be interpreted as evidence for the continued strength of TRUDI and the freedom of state actors to choose a specific regime form, whereas a blurring of regimes and the convergence of policies would indicate a loss of state autonomy and capacity (see, for instance, van Kersbergen 2000; Schwartz 2001; Rothgang et al. 2006).

State transformations in the Silver Age

Since the mid-1970s, the TRUDI state has been under increasing pressure. Developments such as globalization and economic crises, rising public debt and the end of full employment, changing demographics, shifts in work and family patterns, and the emergence of ‘new social risks’ jeop-ardize the arrangements and government functions described above.


The transformations fostered by these developments may occur in two dis-tinct dimensions: organizational and territorial. On an organizational axis, we may observe shifts of the capacity to act ‘out’ to the private sector. Much of the literature in the 1990s and the early years of the twenty-first century focused on (the extent of) retrenchment, cuts in the welfare state and the privatization of state functions writ large (Huber and Stephens 2001; Pierson 2001; Gilbert 2002; Castles 2004; Hays et al. 2005; Swank 2005). On a territo-rial axis, competencies formerly entrusted to the nation state may move ‘up’ to the international level, for instance, to the European Union or the World Trade Organization (WTO; for an overview, see Zangl 2005). Moreover, even where political authority legally remains at the national level, its use may be effectively restrained by the competitive logic and the race-to-the-bottom mechanism of economic competition, leading to a hollowing out of the state.

So, what has happened to the TRUDI model in the age of globalization and ‘permanent austerity’ (Pierson 2001)? To what extent has this state form lost its competencies and overall leverage? Where has political authority shifted – ‘out’ to (national) private actors (privatization), ‘up’ to public inter-national actors (internationalization) or, in a twofold move, to private international actors (transnationalization, see Dingwerth 2007; Abbott and Snidal 2009; Albert et al. 2009 as well as Chapters 4 and 7 in this volume)? What is the role of the state in the post-national constellation? Has the TRUDI model been replaced by a new state form? To what extent has the state been a ‘victim’ or an initiator and even ‘master’ of state transforma-tions? Answers to these questions may be summarized under four headings:

• the extent of internationalization and privatization;• transformations of the state versus policy change;• the state as a producer or manager of goods and services; • convergence of regimes.

The extent of internationalization and privatization

As described elsewhere in detail (Leibfried and Zürn 2005; Hurrelmann et al. 2007; Genschel and Zangl 2008, 2014), there has indeed been a fair amount of internationalization and privatization as well as transnationalization regarding competencies that used to be tightly bundled in the TRUDI state. The extent of these transformations, however, differs across policy fields and countries.

The law dimension is particularly characterized by internationalization and transnationalization (see, for instance, Zangl 2005, 2009 as well as the chap-ters in Part III of this volume). By contrast, and even though the legitima-tion requirements of international actors and regimes such as the EU and the WTO have arguably grown, there is little evidence, if any, for a shift of support and legitimacy from the nation state upwards (Nullmeier et al. 2010; Schneider et al. 2010).


With the notable exception of education (Martens et al. 2007), internation-alization is also rather weak in the welfare dimension whose core elements – pensions, healthcare and labour market policies – are still a matter of national decisions, although some aspects of social regulation (for instance, in the field of environmental protection, health and safety, or consumer protection) have been internationalized, especially in the context of the EU. Although states have to some extent attempted to privatize social risks (Hacker 2004), a general race to the bottom and a comprehensive withdrawal from welfare production thus cannot be observed (Starke and Obinger 2009; Obinger et al. 2010 and in Chapter 10 of this volume). Particularly though not exclusively in the welfare dimension, we nevertheless observe considerable convergence, which may indicate a loss of state capacity to implement and uphold nation-specific governance arrangements.

In the resource dimension of the territorial state, there is a surprising amount of internationalization in the areas of taxation (Rixen 2008) and security poli cies (Friedrichs 2007; Jachtenfuchs and Genschel 2013). Altogether, these complex shifts on the territorial (internationalization) and organizational (privatization) axes have undone the quasi-monopolistic state authority in each of the TRUDI dimensions, differences across countries and policy fields in the scope and pace of these internationalization and privatization trends notwithstanding. However, no new centre of political authority seems to have emerged.

Transformations of the state versus policy change

How relevant are these transformations? Do we see genuine state transfor-mations or merely everyday policy change that occurs routinely without necessarily affecting the nature and political authority of the state? Peter Hall’s (1993) conceptualization of policy paradigms and his typology of three ‘orders’ of change may be helpful in this context:

• Where only the levels or ‘precise settings’ of policy instruments are changed while the policy goals and instruments themselves remain the same, Hall speaks of ‘first order change’ (1993, 278).

• ‘Second order change’, by contrast, entails a change of instruments. While policy goals still remain the same, ‘the techniques or policy instruments used to attain such goals’ are modified (1993, 283).

• The most radical transformation, ‘third order change’, occurs where ‘the overarching goals that guide policy in a particular field’ (1993, 278) shift; Hall qualifies this as a paradigm change, that is, as a shift in (cognitive and normative) beliefs about ‘how the world works’.

Hall’s typology follows the logic of a Guttman scale. Hence third order change always implies first and second order change, while second order change implies first order change. How, then, may this framework help us to distinguish genuine state transformations from mere policy change? We may assume that


first and second order change falls well below the threshold of state trans-formations and thus constitutes mere policy change. Only third order change – together with a reallocation of political authority – qualifies as a transformation of the state. Hall (1993, 287) suggests that third order change does ‘not take place primarily within the confines of the state itself’. While civil servants dominate first and second order change, politi-cal or non-governmental actors are responsible for third order change and the implied ‘shift in the locus of authority’. For the purposes of this vol-ume, therefore, only significant transfers of power and responsibilities are regarded as state transformations.

From the production of goods and services to a management role for the state

In the wake of the internationalization and privatization trends outlined above, sovereignty has become increasingly fragmented or shared in the post-national constellation (Zürn and Deitelhoff 2015). Even where private or international actors have assumed responsibilities, these transformations have usually not taken the form of a zero-sum power shift from the state to private or international regimes, but rather amount to the addition of new bearers of political authority to existing governance arrangements. Also, in the new constellation the emerging multi-level and multi-actor governance arrangements have gained more responsibilities than the state has shed. In other words, private and international actors and regimes hardly ever simply replace the state. Frequently, they complement it and co-operate with it in producing the goods and services associated with the four TRUDI dimensions.

A closer look at the emerging arrangements reveals that shifts of political authority sometimes merely concern organizational responsibility for the production of goods and services, sometimes decision-making responsibil-ity, but hardly ever both at the same time, and certainly not the state’s role as the ‘ultimate risk manager’ (Moss 2002). The latter could particularly be observed in the wake of the post-2008 financial market crisis (Cooley and Spruyt 2009; Kahler and Lake 2013). Frequently, a well-balanced interaction between organizational and decision-making responsibilities emerges, for instance, when the privatized production of public goods is accompanied by more stringent regulation of the private producers. Despite many shifts, there is no indication that private, international or transnational actors share the ultimate responsibility for assuring the production of public goods and ser-vices, as we can regularly observe when things go wrong and the state comes back into play as the ultimate problem-solver. So, once the economy faces a real crisis – for instance, in the wake of the Lehman Brothers bankruptcy – it is still the state that has to step in.

In short, the state is not disintegrating, that is, divested of its established governance functions, slimmed down and hence structurally weakened to the extent that is suggested by the hollowing-out imagery. Rather, the


accretion of tasks to private or international actors has caused the state to lose the unity and consistency that it had acquired in the post-war decades through the high concentration and bundling of functions in the old TRUDI-type ‘container state’. While the state, today, is no longer the sole producer of security, legal security, legitimacy and welfare, it remains important as the ‘manager’ of the governance arrangements and networks in which such public goods are increasingly produced (Genschel and Zangl 2008, 2014).

Convergence of regimes

A final development to be explained is the convergence of formerly dis-tinct, country-specific regimes of public goods production. In its heyday, the TRUDI state varied across countries within a ‘corridor’ of possible institu-tional solutions (Rothgang et al. 2006). Has this corridor shrunk over time, indicating a contracting margin of manoeuvring at the national level?

With respect to the territorial axis, this does not seem to be the case. Across the board, the influence of international organizations and regimes is higher today than it was in the 1970s. However, as the speed of internationalization and transnationalization is particularly high in states, notably EU member states, that were by that time already highly internationalized, the variation among countries might even have increased.

On the organizational axis, by contrast, we detect clear signs of conver-gence. Quantitative measures such as expenditure data show a decreasing coefficient of variation due to the catch-up of privatization laggards. As far as regimes are concerned, we detect hybridization and a movement towards much more indistinct or hybrid regimes. This is particularly true in the wel-fare dimension (Rothgang et al. 2008, 2010 and in Chapter 12 of this volume; Rothgang 2009; Starke and Obinger 2009 and in Chapter 10 of this volume), but it is also visible in the resource dimension (Werner and Zimmermann in Chapter 4 of this volume). Thus distinct national institutional arrangements and policy solutions have eroded, indicating a declining capability of states to implement their own nationally specific arrangements for the provision of public goods and services.

Theoretical approaches to the explanation of state transformations

In a nutshell, state transformations are a less straightforward set of processes than is suggested by much of the retrenchment and end-of-the-state literature. For the explanation even more than for the description of state transforma-tions, it holds true that ‘analyzing states entails almost as much hubris as pretending to run them’ (Evans 1995, 4). Therefore we do not pretend to develop a ‘grand’ theory of the state in the post-national constellation, or even to give an exhaustive overview of the pertinent theoretical approaches (Barrow 1993; Shaw 2000; Knutilla and Kubik 2001; Jessop 2002, 2009;


Hay et al. 2006). Even where a single TRUDI dimension is considered, the logic of hypothesis testing soon reaches limits that are difficult to surmount, not just because of the ‘many variables, small N’ problem (Lijphart 1971; Lieberson 1991), but also because the explanandum itself is so multifaceted. In the vein of Renate Mayntz (2009) and Sven Steinmo (2010), we consider a narrative causal reconstruction of various aspects of state change to be more realistic. Our own theoretical work is geared towards the explanation of key dimensions of state change in the OECD world, and hence towards middle-range theorizing on the questions addressed in this volume.

As the explanation must take into account contingent factors, the obvi-ous interdependence of cases and the possibility of causal heterogeneity, it cannot, in our view, fully correspond to a textbook-style testing of causal hypotheses along the lines of, for instance, King et al. (1994), be it based on statistical or qualitative and comparative methods. Explaining findings therefore requires an equally complex explanatory model or, rather, a heu-ristic that allows us to make use of the different theoretical approaches that attempt to explain societal changes, to explore their respective merits and demerits, and to combine them.2 In doing so, we consider functionalist, actor-centred, constructivist and institutionalist approaches.

In the tradition of functionalism, early studies on state change started from the assumption that globalization has set in motion uniform, conver-gent processes of transformation. Thus observed state change is – in line with, for instance, new institutional economics – interpreted as a response to the growing urgency of problems and to ‘objective’ functional deficits caused by driving forces such as globalization; here change is considered to be explained satisfactorily where its functionality can be demonstrated (see, for instance, North 1991a). In this reasoning, the privatization of public infrastructure and services is often perceived as a direct functional response to increased efficiency pressure (for a critical discussion, see Cacace 2010a).

The major contribution of this line of thought is the emphasis on driving forces of change. Globalization, demographic change, individualization and the like are conceptualized as secular trends that challenge the function-ality of existing institutional and constitutional arrangements. The weak-nesses of this approach are twofold: First, the driving forces themselves are regarded as exogenous factors challenging the nation state, while in reality trends such as globalization may well be instigated by governments and state bureaucracies in a kind of ‘self-transformation’ (Huber et al. 2015b). Second, explanations along these lines are deterministic to the extent that economic and social processes like the ones mentioned above are said to have direct and sustained causal effects – an assumption that empirical research has been unable to corroborate. From an explanatory point of view, these accounts are unsatisfactory when they suggest that political actors and institutions have no other choice – if they do not wish to risk their own demise by failing to provide the services required – but to functionally adapt to economic


(or technological, demographic, cultural and so on) developments. The vari-ation in the direction, amount and timing of state transformations clearly proves such naïve explanations wrong.

This well-known ‘functionalist fallacy’ must be avoided for at least three reasons. First, contrary to an untested assumption of functionality, it should be considered that in reality dysfunctional status quo arrangements often resist functional adaptations, or these reforms themselves prove to be dys-functional (Streeck and Thelen 2005). Second, in the light of national TRUDI variants, the same driving forces may trigger problems of varying degrees of urgency in different states and therefore require quite different forms of functional adaptation (Schmid et al. 2010; Frisina Doetter et al. in Chapter 12 of this volume). Third, even where it appears appropriate, a functional expla-nation still tells us little about the mechanisms of successful adaptation.

In order to avoid the functionalist fallacy, actor- and interest-centred, idea-based and institutionalist approaches, each privileging its own bundle of variables and causal mechanisms, are a necessary complement and impor-tant corrective. Actor-centred approaches may explain the endurance of a sta-tus quo with reference to the (material) self-interests and strategic actions of powerful (individual or collective) actors that oppose change. Reforms may often be explained by identifying the interests of influential actors or actor coalitions and constellations (Scharpf 1997). And where functional adapta-tion appears successful, it still needs to be explained how rational egoistic actors manage to circumvent the ever-present problems of collective action (Olson 1965; Coleman 1990).

Of course, stringent versions of the actor-/interest-centred perspective and notably the rational-choice approach have also been criticized – and not without reason (Green and Shapiro 1994; Boudon 1998). Rationality is clearly ‘bounded’. Moreover, as constructivist approaches illustrate, prefer-ences are not ‘objective’ but socially constructed, situations frame individual decisions and, in many cases, actions are dictated not by utility maximiza-tion, but rather by a logic of appropriateness (Elster 1989; March and Olsen 1989; Tversky and Kahneman 1989). Thus individual and collective percep-tions and beliefs – as well as the social construction of problems and their urgency, or of the feasibility of reforms – play a major role in explaining the behaviour of actors and, consequently, processes of change. Such ideas, interpretive patterns and belief systems may slow down or even prevent change if they contradict the adaptation processes fostered by driving forces, or they may, by contrast, also catalyse change where reform attempts are in line with prevailing ideas; in an increasingly internationalized environment, they may initiate policy learning and institutional reforms (Hall 1989; Blyth 1997, 2002; Maier et al. 2003).

Institutionalist approaches, finally, focus on institutions in state transfor-mations and highlight their decisive role in explaining change. Important variants of the new institutionalism such as rational-choice institutionalism


and actor-centred institutionalism, on the one hand, and sociological and discursive institutionalism, on the other, build a bridge between actors or ideas and institutions (Scharpf 1997; Schmidt 2010), although the definition of institutions sometimes remains unclear. A central assumption of these approaches is that, on the one hand, institutions provide the framework for action and sometimes influence actors’ preferences and, on the other, there is a close and permanent link between norms – that is, ideas – and institu-tions (Blyth 2003). Thus boundaries between actor-centred, constructivist and institutionalist approaches, and between the different variants of the new institutionalism (Hall and Taylor 1996), are fluid.

Besides rational-choice institutionalism and sociological or discursive institutionalism, historical institutionalism is particularly relevant for us, as it deals intensively with the development of societal macro-institutions over long periods of time. After all, historical institutionalists re-awakened interest in the state from a political science perspective, and this precisely at a time when the state as a political order was allegedly moving towards a crisis (Evans et al. 1985; Almond 1988; Steinmo et al. 1992). This variant of institutionalism highlights the persistence of institutional arrangements and the path dependency of policy and institutional change – self-reinforcing dynamics – primarily with regard to formal political institutions (which have more or less veto power and are therefore more or less open to reforms), and to the state as a whole (see Tsebelis 2002 on veto players and Immergut 1992 on the ‘classic’ case study on veto points in health policy). Fundamental change in this perspective is often restricted to ‘critical junctures’ and hence takes the form of abrupt change in the wake of exogenous shocks. However, more recently, some proponents of historical institutionalism have also turned their attention to triggers and mechanisms of gradual, endogenous, but potentially no less momentous institutional change (Pierson 2004; Streeck and Thelen 2005; Beyer 2006).

The explanatory framework

How can we make use of these theoretical approaches in order to develop an explanatory model or, rather, a heuristic, as we do not aim at a traditional causal model? The model in Figure 1.1 is built on the distinction between driving forces and modifiers that, taken together, lead to the state transforma-tions described above. The term ‘driving forces’ refers to all those secular trends that affect the countries of the OECD world, albeit to a greater or lesser extent, thus challenging extant state structures but also, occasionally, opening up new windows of opportunity for change – and hence, in both cases, causing state transformations such as the privatization, internation-alization or transnationalization of state functions or the convergence of regimes. Here we notably think of economic globalization and technological innovation, but demographic change, individualization and related shifts in


value orientations may also be relevant. Driving forces may come as short-term exogenous shocks. However, the long-term, gradual trends that do not immediately trigger state transformations are likely to be at least as impor-tant in the long run (see Pierson 2004 and – for the welfare state – Alber 2001 on such trends and their effects). In the traditional language of causal explanation, driving forces are the independent variables in the equation. The concept of driving forces leans towards functionalist theorizing, as it implies that processes such as globalization challenge existing arrangements and therefore ‘require’ functionally adequate transformations.

As we have made clear in our critique of functionalist explanations, it would be wrong, however, to assume that all observed transformations may be explained by simply identifying driving forces alone. We use the term ‘modifiers’ to refer to all those factors that accelerate or brake state transfor-mations or that explain why the same (potential) driver of change fosters weaker or stronger reactions and pushes states onto different trajectories. Hence modifiers take the role of intervening variables. They explain why some states – notwithstanding the roughly equal nature or strength of driv-ing forces – are more and some are less inclined to follow the path of inter-nationalization and privatization than others, why such pressures are dealt with in different ways, or why these processes shrink or expand the corridor of variation for particular state arrangements in different policy fields. There are various kinds of modifiers. Once again borrowing from actor-centred,

Driving Forces Modifiers Transformations

Internationali-zation

Transnationali-zation

Material Ideational Institutional

Actors,Interests,

Preferences

Values,Beliefs,

Perceptions

Political–InstitutionalStructures

Actor-centredApproaches

ConstructivistApproaches

InstitutionalistApproaches

Technological Progress

Demographic Change

Functionalist Approaches

• Globalization

•

•

• Value Change

• Privatization

•

•

• Convergence

Figure 1.1 A heuristic for the explanation of state transformations


constructivist and institutionalist approaches, we rely on material modifiers (actors’ interests and preferences), ideational modifiers (values, beliefs and perceptions) and institutional modifiers (formal political structures).

It may not always be necessary to draw on all three types of modifiers to explain a state transformation. Sometimes a particular institutional feature (for instance, the number and kinds of veto points), the prevalence of a certain belief system (for instance, the dominance of neoliberal convictions) or particular interest groups that have a strong influence suffice to explain outcomes. In some cases, the driving forces alone might be so strong and the functional necessity of reforms so overwhelming that an explanation based on these factors suffices. In other cases, only the interplay of many or all of the potentially relevant factors provides a satisfactory explanation of out-comes. As a heuristic, the model is quite flexible and permits all these speci-fications. Its flexibility is its key strength, as it provides a systematic place for different theories and enables us to come up with complex explanations that combine different driving forces and modifiers.

Outline of the book

The main body of the volume is organized into four parts, and each addresses one of the four TRUDI dimensions: resource (II), law (III), legitimacy (IV) and welfare (V). Finally, Part VI offers a synthesis and assessment of key find-ings. In the resource dimension (Part II), Carina Schmitt and Herbert Obinger discuss the rise and decline of public enterprises in Western democracies (Chapter 2). They offer a sweeping account of the state’s growing role in the economy and identify the driving forces and modifiers of the ubiqui-tous, if more or less pronounced, privatization trend of the last few decades. Comparing France, Germany, Sweden and the United States, Markus Tepe, Bernhard Kittel and Karin Gottschall (Chapter 3) discuss whether New Public Management reforms as a specific kind of state transformation have dimin-ished the wage gap between public and private sector employment, lead-ing to convergence in public and private wage and employment regimes. Jörg Werner and Jochen Zimmermann explain the rise of a transnational regulatory regime in the area of financial reporting, that is, change in a field that is crucial for economic life writ large (Chapter 4).

Turning to the law dimension (Part III), three chapters analyse how the state monopoly on guaranteeing the rule of law and a constitutional order has been replaced by a mixed regime in which public and private interna-tional and transnational regimes and courts or court-like institutions have assumed some law-making and law-enforcement responsibility. Based on five case studies (GATT/WTO, European Convention on Human Rights, Convention on Trade in Endangered Species, ILO, UN Security Council), Aletta Mondré discusses why international dispute settlement procedures have been introduced in order to guarantee the rule of law beyond the state


(Chapter 5). Susanne Schmidt, Michael Blauberger and Tilman Krüger, in their comparison of the EU and the WTO, concentrate on the growing judi-cial power of international law and international courts, which has led to an increasingly complex maze of overlapping legal orders (Chapter 6). While these two chapters examine international bodies created by nation states, which are public entities, Gralf-Peter Calliess, Hermann B. Hoffmann and Jens Michael Lobschat explain the transnationalization of commercial law, that is, the growing legal competences of private transnational arrangements (Chapter 7).

In the legitimacy dimension (Part IV), the authors turn to the presumptive prerequisites of democratic quality and legitimacy at the international and European levels and to the effects of state transformations on the demo-cratic quality and legitimacy of national political regimes. Andreas Hepp, Katharina Kleinen-von Königslöw, Swantje Lingenberg, Johanna Möller, Michael Brüggemann and Anke Offerhaus explain why the European public sphere remains strongly segmented (Chapter 8). Building on a content anal-ysis of legitimation discourses in the quality press of Germany, the United Kingdom, Switzerland and the United States, Sebastian Haunss, Henning Schmidtke and Steffen Schneider examine whether internationalization has caused an erosion of regime support (Chapter 9). They show that interna-tionalization has not had a uniform impact on the legitimation of Western democracies and explain that finding.

Finally, three chapters explain state transformations in the welfare dimension (Part V). Studying pensions, labour market, healthcare and family policies in four small developed economies, namely, Austria, Denmark, New Zealand and Switzerland, Peter Starke and Herbert Obinger examine how changes of the international economy have transformed the welfare state (Chapter 10). Two further chapters focus on specific policy fields: Philipp Knodel, Kerstin Martens and Dennis Niemann (Chapter 11) address policy change in secondary education, while Lorraine Frisina Doetter, Ralf Götze, Achim Schmid, Mirella Cacace and Heinz Rothgang explain the hybridization of healthcare regulation as the most important state transformation in that policy field (Chapter 12). Both chapters are comparative: The education chapter contrasts Germany and England, and the healthcare chapter examines England, Italy, Germany, the Netherlands and the United States.

In the conclusion (Part VI, Chapter 13), we draw on the findings of the volume’s 11 empirical chapters and extant literature on state transforma-tions to formulate some tentative generalizations on the development of the TRUDI model in the context of the emerging multi-level governance arrangements of the post-national constellation. We ask whether the demo-cratic nation state is to be regarded as a victim or as the master of transfor-mation processes.


Notes

1 States in other world regions are analysed in Parts IV and V of the Oxford Handbook of Transformations of the State (Leibfried et al. 2015).

2 This attempt to use distinct theories in order to combine their respective strengths follows Allison’s ‘congruence analysis’ (1971), Levi (2002, especially 51–4) and Sil and Katzenstein (2010) with their calls for an ‘enlightened’ eclecticism – even at the expense of parsimony.

Part IIResource Dimension: The Territorial State

19

2The Rise and Decline of Public Enterprises in Western DemocraciesCarina Schmitt and Herbert Obinger

Public enterprises, especially public utilities, played an important role in economic and social policy during the first three decades after the Second World War. With the rise of the neoliberal paradigm in the 1980s, state involvement in economic affairs was challenged and the privatization of state-owned firms moved to the top of national political agendas. However, there were significant cross-national differences, both in the historic involve-ment in business affairs and in the degree to which governments retreated from entrepreneurial activities. In this chapter, we trace and explain this variation, examining the factors responsible for the emergence and decline of public enterprises in the Western world between circa 1850 and 2007, with an emphasis on public utilities.

The following sections begin with a look at the driving forces behind the emergence of state-owned enterprises in the Western world prior to 1980. Then we present our conceptualization and measurement of privatiza-tion in 20 Western OECD countries, describing the retreat of the state from entrepreneurial activities from 1980 to 2007. Next, we provide an empirical analysis of the determinants of cross-national and cross-sector differences in the intensity of privatization. Here we see that the differences can be attributed to variations in the strength and resources of the political left, fiscal problems, economic wealth and economic openness. In the final section, we summarize our findings and outline the outcomes of public utility privatization.

The rise of state-owned enterprises from circa 1850 to 1980

The formation of a state-owned enterprise sector occurred in several waves. The reasons for setting up state-owned undertakings in the Western world were as diverse as the patterns of public entrepreneurship that emerged.

Fiscal motives

Raising public revenues is, arguably, the oldest rationale for creating state-owned enterprises. In their efforts to raise money for the public purse,

20 Public Enterprises in Western Democracies

monarchs across Europe used the special prerogative of the Crown to set up public monopolies in particular sectors. Reaping a profit on a govern-ment monopoly is the economic equivalent of taxation, a convenient and relatively cost-efficient way of extracting resources for the state, especially when tax collection systems are absent or underdeveloped (Clifton et al. 2003, 18–19). This fiscal motive was of particular importance for goods with an inelastic demand, such as salt, tobacco, sugar and, eventually, alcohol. State monopolies on some of these goods date back to the Middle Ages, and in contemporary times, this fiscal motive is also pervasive in the petroleum, natural gas and gambling sectors.

Functionalist pressure: The Great Transformation

The next waves of nationalization occurred in the wake of the industrializa-tion, urbanization, population growth and technological change that marked the second half of the nineteenth century. The dramatic social and economic repercussions of these changes along with the functional requirements of the emerging industrial sector necessitated the build-up of network-based infrastructures in sectors such as gas, water, electricity, transport and communication (Wagner 1911; Forsthoff 1938). Most of these services were initially delivered by private enterprises. For example, in 1860, more than 90 per cent of the railway tracks in the world were owned by private companies (Bogart 2009). Early government intervention in the network-based service sectors typically focused on securing right of way on scarce and fragmented private lands, regulation of service quality and curbing the prices and profits of the emerging private monopolies (Millward 2004).

In the nineteenth century, service provision in the electricity, gas and water sectors was limited by technical factors such as rudimentary transmission technology, and mainly restricted to the municipal level. The initial move from arm’s length regulation to municipal ownership and public service provision was sparked by a mixture of fiscal and social policy motives, especially in large cities which were suffering the devastat-ing social repercussions and hygiene challenges of urbanization and indus-trialization (Millward 2011a, 2011b). The lack of modern sewage disposal systems in metropoles such as London contributed to outbreaks of cholera that claimed thousands of victims. Building a modern infrastructure that would shelter citizens from the negative social repercussions of the Great Transformation was a key impetus for the spread of municipal service provi-sion. In their efforts to cope with hygiene problems and rampant disease in urban agglomerations, powerful local governments relied on municipal organizations to extract revenues from profitable network industries, but the formation of public enterprises cannot be attributed to municipal socialism alone (Millward 2004). The search for effective policy responses to the social and functionalist pressures of the Great Transformation mobilized actors across the entire political spectrum (Polanyi 2001).

Carina Schmitt and Herbert Obinger 21

In Vienna, the municipalization of gas, electricity and tramways was initiated by a member of the Christian Social Party, Mayor Karl Lueger, who also commissioned the construction of a water pipeline to supply what was then one of the biggest cities in Europe with fresh spring water from the Alps. Similarly, in the growing cities of the United States, pollution, problems of sewage disposal and concerns about public health led to municipal owner-ship in a number of sectors. By 1900, more than 80 per cent of the 50 largest cities in the United States had public waterworks (Galambos 2000, 282). In the Netherlands, left-wing liberals’ efforts to protect consumers from private monopoly prices led to the takeover of gas and electricity supply by the municipalities (Davids and van Zanden 2000, 255). Fiscal and social welfare issues also led to the creation of local savings banks in a number of countries. Wengenroth (2000, 109) argues that the local savings banks in Germany were established to encourage saving among low-income groups and reduce the demand for poor relief.

What emerged from these developments during the second half of the nineteenth century was a mixed ownership pattern in local infrastructure sectors, with public and private companies co-existing and competing with each other. Governments acted both as owners of public enterprises and as regulators of private business, and various complex forms of public-private co-operation emerged.

Unification and consolidation of nation states and empires

In the final decades of the nineteenth century, technological progress together with the formation of new nation states and the growing competition between them served to accelerate the proliferation of public enterprises not only at the local but also at the national level. Efforts to speed up political and social unification, the promotion of industrializa-tion and economic development in nations suffering from a lack of private capital and attempts to forge and control national territories all made use of public ownership.

In recently established countries such as Italy and Germany, the newly unified regions had to be connected through transport and telecommunica-tion services. In the first year of German unification, the German Reichspost (Imperial Post) was established to control mail, telegraph, telephone and, eventually, some banking services (Wengenroth 2000, 104–5). In a similar vein, Ireland witnessed a wave of nationalizations in its first years of inde-pendence from the United Kingdom (Millward 2011b, 676). Linking disparate regions was especially important for large, sparsely populated countries such as the United States, Sweden, Norway and Australia (Westlund 1998). In the years following American independence, the US federal government became involved in the acquisition and allocation of public lands and the provi-sion of postal services. Local governments in all of these countries played an active role in the construction of canals, harbours and other transport


infrastructures, and according to Bogart (2009, 217), railroad nationalization between 1860 and 1912 was most common in countries with low popula-tion density. In Australia, the Commonwealth and the state governments established autonomous statutory bodies to control railways, ports, water and irrigation, and electricity.

Building national transport, energy and communication infrastructures was thus an important part of state- and nation-building, triggered by efforts to increase social cohesion, national unity, government authority and state legitimacy. Colonial powers were concerned not only with state consolidation and internal links to the capital, but also with maintaining links between the homeland and the colonies. In the age of imperialism, establishing effective long-distance transport (airlines) and communication facilities was essential for economic exchange between mother country and outpost, and such national facilities played an important role in the bids for colonial power (Toninelli 2000).

Military and war

The need for new national defence strategies was a further reason for setting up public enterprises. In Europe, in particular, the military tensions between the Great Powers and the pervasive nationalism and imperialism of the late nineteenth to mid-twentieth century fuelled massive war preparation efforts. The nexus between war preparation and public enterprises was reinforced by two military developments in the second half of the nineteenth century. First, rapid progress in military technology resulted in a dramatic increase in the firepower of weaponry (Porter 1994). Second, mass conscription became the norm throughout continental Europe. These developments dramatically changed the nature and conduct of war. It became clear that future military conflicts between the Great Powers would be waged as industrialized mass wars (Porter 1994), with continental Europe as the arena (Millward 2011b). Millions of soldiers and all kinds of supplies would have to be brought quickly to the front lines, and it was, in large part, pressure from military authorities that promoted the rapid build-up of national transport and com-munication infrastructures.

Railways were of particular strategic importance. Military considerations and efforts to speed up economic development led to extensive state inter-vention in the railways sector, and in countries such as Sweden and Norway the army was even involved in the construction of trunk lines (Stevenson 1999, 171; Millward 2004, 5, 2011b, 682). From 1870 to 1914, the total length of European track lines increased from approximately 105,000 to 290,000 km (Stevenson 1999, 169). Econometric evidence indicates that the significant increase in state ownership in the railways sector between 1860 and 1912 was causally linked to the military capabilities of neighbouring countries; by 1913, roughly 30 per cent of the world’s railroad tracks were state-owned (Bogart 2009).


Information was also imperative for military success, and in the early twentieth century, both telegraph and telephone lines were nationalized in most countries (Millward 2011a). Although there were various reasons for this development, military concerns were certainly an important factor. In addition, the military had a strong interest in strategically important manu-facturing industries (steel, shipbuilding, chemical), mining (coal, iron ore) and energy (oil). War preparation and enactment were important triggers for growing state interference in these sectors. State intervention in the oil sector is an example: The nationalization of British Petroleum in 1914 was motivated by efforts to secure foreign oil supplies for the military. The Great War clearly demonstrated the significant strategic importance of oil and, in the post-war period, a number of countries made strenuous efforts to seize foreign oil supplies (Noreng 1981) and nationalized their oil refineries.

A further important aspect of war preparation and military rivalry was the need to achieve economic self-reliance and reduce dependence on foreign capital, raw materials and foodstuffs in times of war. Public enterprises played a great role in these plans. Perhaps the most spectacular example was in Spain, where the Franco regime’s comprehensive nationalization programme brought railways, telecommunications, shipbuilding, oil distilla-tion, chemical industries, airlines (Iberia) and engineering companies under state control in the 1940s (Carreras et al. 2000, 210–11). The nationaliza-tions by leftist governments in France in the late 1930s and the formation of the General Italian Oil Company (Azienda Generale Italiana Petroli/AGIP) in fascist Italy were also motivated by issues related to national defence and economic autarky. Similar considerations played a role in the establishment of the Reichswerke Hermann Göring (steel, mining and munitions industry) in Nazi Germany.

During wartime, war-induced economic isolation or destruction typically led to shortages of foodstuffs, commodities, labour and raw materials. Governments everywhere responded to economic scarcity not only with a broad set of regulatory policies but also with the nationalization of enterprises in strategically important sectors (Porter 1994). This kind of ‘war socialism’ provided governments with experience in managing the economy (de Swaan 1988) and left a long-lasting post-war legacy in many countries.

The repercussions of war after the cessation of hostilities engendered a further step on the road to public ownership. Many European countries suffered from massive war-related destruction, especially after the Second World War, when large parts of the infrastructure and many production sites were flattened by air strikes and other combat activities. Economic reconstruction of national infrastructure grids required huge injections of capital that only the state was willing or able to mobilize under the adverse and sometimes disastrous economic conditions of the immediate post-war years. Governments responded pragmatically rather than ideologically, launching major nationalization programmes in the immediate post-war


period.1 De Gaulle’s government (1944–46) nationalized the coal mines, the gas and electric power industry, Air France, Renault, several commercial banks, 36 insurance companies and the Bank of France (Porter 1994, 169; Chadeau 2000, 188–9). The United Kingdom also implemented comprehen-sive nationalizations in the late 1940s and early 1950s. Examples include Cable and Wireless, the Bank of England, the railways, civil aviation, coal, gas and electricity; in 1951, the government assumed control of the iron and steel industry. In Australia, the airline Qantas was nationalized under the auspices of a Labor cabinet in 1947. The Scandinavian countries established a common airline, Scandinavian Airline System (SAS), in 1946.

Germany and Austria faced the problem of how to deal with the Nazi undertakings. In Germany, large parts of heavy industry, notably the muni-tions industry (for instance, Reichswerke Hermann Göring and Montan Ltd.), were dismantled or restructured by the Allied Powers. Volkswagen, another enterprise created by the Nazis, was offered for sale but there were no buy-ers, so the state of Lower Saxony and the federal government stepped in (Wengenroth 2000). In Austria, the post-war national unity government socialized about 70 companies in 1946 and 1947. This affected large parts of the heavy industry and mining sectors, three banks, the electricity sup-ply industry and transport companies. Again, pragmatism rather than ideol-ogy was the rule. The main motive for this comprehensive nationalization programme was to solve the problem of ownerless German property that emerged during Nazi rule and to avert reparation claims by the Allied Forces on these German assets (Stiefel 2011, 35–6).

Economic drivers

At least three economic drivers for the emergence of public enterprises are highlighted in the literature (Toninelli 2000, 7–8). The first is related to the well-established notion in economics that the network-based sectors consti-tute natural monopolies due to huge fixed costs associated with the construc-tion of grids (for instance, in gas, electricity and railways) and economies of scale. In this case, service provision by a single company is most efficient. When the market fails, however, the problems of controlling monopoly prices and providing a sufficient quantity and quality of service become acute. There are two basic approaches for dealing with these problems, and both have been utilized extensively in Western economies. With the notable exception of the United States, all Western countries have opted for public ownership of a variety of network-based sectors in order to control prices and the quality of service provision. The early decades of the post-war era were characterized by a broad consensus on the necessity of what in different political and legal contexts has been called ‘public utilities’ (Graham 2000), services publics (Auby and Raymundie 2003) or Daseinsvorsorge (Forsthoff 1938). Goods and services such as water, gas, electricity, telecommunications and transport were directly provided by public enterprises. The United States


pursued another approach: It remained strongly committed to private provi-sion and relied on a regulatory approach that started with establishment of the Interstate Commerce Commission in 1887 (Toninelli 2000, 12) and the adoption of anti-trust legislation.

Economic modernization and growth efforts, and the entry into high-risk strategic markets requiring large-scale capital investment comprise the second, pervasive, economic driver for the establishment of state-owned enterprises. This type of policy was particularly important in economically less-developed countries where governments were striving to catch up with industrialized countries. Large, state-owned holding companies such as Istituto per la Ricostruzione Industriale and Ente Nazionale Idrocarburi in Italy, and Instituto Nacional de Industria in Spain, played a particularly prominent role during the post-war period (Martinelli 1981; Amatori 2000; Carreras et al. 2000).

The third economic driver, responsible for numerous nationalizations, was associated with the bailouts enacted in periods of severe political turmoil and deep economic crisis. Carried out by actors from across the entire ideological spectrum, such rescue operations have been on the political agenda repeatedly over the past hundred years. Many of the nationalizations that occurred dur-ing and immediately after the two world wars fall into this category, and the Great Depression also triggered numerous nationalizations in the indus-trial and banking sectors. The oil crises of the latter third of the twentieth century ushered in another round of rescue operations. In the 1970s, Rover and Rolls-Royce were nationalized by a Conservative government in the United Kingdom, and the Swedish centre-right government bailed out sev-eral industrial companies (Pontusson 1989, 133–4). Similar rescue operations in manufacturing took place in Italy, Austria, Spain and France in the 1970s and 1980s. Typically, these were designed to mitigate or postpone the nega-tive effects of economic structural change and globalization on the industrial labour force. More recently, the global financial crisis has produced economic rescue operations on an unprecedented scale. Contrary to the 1970s, the new nationalizations are focused mainly on the financial sector.

Party politics and ideology

Before the late nineteenth century, internal and external security interests, fiscal motives and functionalist pressures were the main drivers of public ownership. Ideology was significant for nationalization but not its root cause. As we have seen, ‘[m]uch of the drive to municipalisation predated the rise of socialism as a force in elections and predated the propagation of munic-ipal socialism as an ideology’ (Millward 2004, 12). During the twentieth century, however, as labour parties gained increasing representation in gov-ernments, ideology grew in importance. Without doubt, the political left and the affiliated unions are ideologically inclined to public interference in the business sector. The radical left even called for nationalization of the


means of production, although this option was not put into practice any-where but in the Soviet Union and the communist bloc. Influenced by the past experience of economic depression and war, and by the related prolif-eration of Keynesian ideas, Social Democrats believed that state interference in economic affairs and generous welfare state programmes could help to smooth the business cycle and cope with the market failures inherent in capitalism.

Although many public enterprises were already in place by the time the left became a powerful political force, they were further expanded to become key elements in the mixed and coordinated market economies that emerged after the Second World War. This was in keeping with the prefer-ences of trade unions, which were particularly well organized in the public enterprise sector. State-owned enterprises were often utilized as social laboratories or employment buffers and served as models for the private business sector. The employees of public companies enjoyed various privi-leges such as life-long employment contracts, fringe benefits and a civil servant status that gave them higher statutory welfare benefits. In France, for example, Renault was an industrial relations laboratory, with longer hol-idays, higher wages and strong union representation within the company (Chadeau 2000, 201).

Nevertheless, the link between left-wing ideology and public enterprises is not as strong as is often argued. Sweden is a case in point. Despite a passion-ate planning debate right after the war, the Social Democrats had, according to Carlsson, ‘no political ambition to socialize the Swedish industry. Rather, there were numerous motivations for state ownership, among them defense supplies, energy supplies and fiscal issues’ (1988, 178–9). Although the Social Democrats controlled the government between 1932 and 1976, state owner-ship in industry remained comparatively low. Indeed, the centre-right cabinet that followed nationalized more companies in its first three years in power than the left had done in the previous 44 years (Pontusson 1989, 133).

Overall, the left was a significant political force behind the spread of state-owned enterprises, but it was certainly not the only one. All politi-cal groups encouraged state ownership of certain industries, with various motivations. The Fascists and Nazis were concerned about military power and economic self-reliance. Conservatives saw a close nexus between public infrastructure and the extension of state authority over entire national ter-ritories: An effective infrastructure was a prerequisite for securing the omni-presence of the state in domestic affairs ( Jäger 2004, 42–5). Conservative thinkers also strongly emphasized the sense of common purpose associated with public utilities as a means of fostering social well-being. According to the German lawyer Ernst Forsthoff, the main purpose of public utilities was to satisfy common needs under socially appropriate conditions, a function he described as Daseinsvorsorge. In his view, Daseinsvorsorge should be a mat-ter of public administration and mainly a responsibility of the communes,


with the main difference between the private and the public provision of services being that the latter is non-profit (Forsthoff 1938).

From 1945 until the advent of the 1970s oil crises, this notion was basically shared by all Western governments. Indeed, one key aspect of the Keynesian post-war compromise in most advanced democracies was that public enterprises should provide air, rail, postal and telecommunications services, electricity and gas supplies, and a broad range of local services such as water and waste disposal. These public utilities were able to cross-subsidize each other, both within and between sectors, thus providing all citizens nationwide with goods and services of uniform quality at uniform prices, irrespective of local disparities. With this universal service provision, the public utilities ful-filled important social welfare functions, serving as an important extension of the core welfare state and contributing to social cohesion across the whole state territory (Leibfried 2001). To varying degrees in a number of European countries, there were also state-owned companies in the manufacturing, mining, insurance and banking sectors.

The decline of public enterprises

In the early 1980s, the optimistic faith in the beneficial effects of big government came to an end, partly due to the economic impact of the two consecutive oil shocks in the 1970s. The advent of stagflation had been an unknown phenomenon in the immediate post-war decades, and it was not easily amenable to classic Keynesian recipes. As economic performance deteriorated in the second half of the 1970s, several conservative govern-ments bade farewell to the post-war compromise between labour and capital (Boix 1997). Increasingly, public interference in the commercial decisions of state-owned enterprises was blamed for efficiency losses that had to be bal-anced by public subsidies.

The exogenous oil shocks were just one factor among the many that drove the late-twentieth-century transformation of the state-owned enterprise sector. Technological changes, growing public debt, the global spread of neoliberal ideas, the collapse of command economies in Eastern Europe, the advancement of economic globalization, and the formation of the Economic and Monetary Union and deepening of European integration were all impor-tant driving forces for public-sector restructuring. From the early 1980s onwards, there has been a general trend away from state-owned enterprises and, at various points in time, all of the advanced democracies launched major privatization programmes – but there are significant cross-national differences in the degree to which governments have retreated from entre-preneurial activities. In the following sections, we attempt a quantitative analysis of those differences. First, we discuss how privatization can be con-ceptualized and measured, and then we use a new data set to map privatiza-tion intensity in 20 OECD countries between 1980 and 2007.


What is privatization?

The privatization of public enterprises proceeds in a stepwise fashion that involves two main types of privatization: formal and substantial. Formal privatization is particularly prevalent in the public utility sector. In rich democracies, we observe two subtypes. The first is the transforma-tion of a departmental agency in a government ministry (for instance, Deutsche Bundespost) into a separate public corporation (for instance, Deutsche Post) that is subject to special or public law. While a depart-mental agency is subordinate to the ministry, a public corporation is an autonomous public body with independent legal status and a partially commercial structure. Although the objectives of a public corporation are often defined by law, it has more autonomy in its day-to-day opera-tions than it would as a departmental agency. The second type of formal privatization is the transformation of a public corporation into a state company that is subject to private law, like a joint stock company (for instance, Deutsche Post AG). A state company is subjected to the same rules and restrictions as a private firm. In contrast to a departmental agency or a public corporation, it is only responsible for its own well-being, and it is subject to commercial management and more difficult budget constraints. After formal privatization, the state remains the only stakeholder, but it becomes possible to sell shares, which is referred to as substantial privatization. Figure 2.1 illustrates the conceptualization of formal and substantial privatization.

Conventional measures of privatization such as privatization revenues do not cover formal privatization, so we have developed a new index that covers both formal and substantial privatization. This new Public Entrepreneurship Index (PEI) relates annual public enterprise revenues to the GDP and thus provides a measure of the extent to which the state is involved in the national economy.2 It has the advantage that it can measure both a rise and a decline in public entrepreneurship: A ceteris paribus decrease in the PEI indicates pri-vatizations, while an increase is indicative of nationalizations.

Mapping privatization

Figure 2.2 shows the development of public entrepreneurship in 20 OECD countries between 1980 and 2007. The database comprises data on all economically relevant enterprises (1,544 in total) that were owned by the

State Company (Public Shares

= 100%)

Formal Privatization

Public Corporation

Departmental Agency

State Company (Public Shares

< 100% and > 0%)

Formal Privatization

Private Company (Public Shares

= 0%)

SubstantialPrivatization

SubstantialPrivatization

Figure 2.1 Conceptualization of formal and substantial privatization


central state level during this period and includes information from national governments, regulatory agencies, legal codes and public enterprises.3 It is clear that the state has retreated from entrepreneurial activities in nearly all countries over the last 30 years, with governments throughout the OECD world launching comprehensive privatization programmes and divesting public enterprises to the private sector. On average, public enterprise rev-enues amounted to 6.3 per cent of GDP in 1980, compared to only 3 per cent in 2007.

Despite this common downward trend, there are remarkable differences in privatization intensity between countries. For example, an extremely marked decline in public entrepreneurship can be observed in the United Kingdom. In 1980, the value added by British state-owned enterprises was almost eight per cent of GDP, but today it is close to zero. Countries in Southern Europe also relied strongly on privatization: In both Spain and Portugal, the involvement of the state in the economy has declined by about 85 per cent. However, not all countries divested themselves of public enterprises on such a grand scale. In Scandinavia, the rollback of the state was generally mod-erate at most, and in Norway and Sweden the state’s involvement in the national economy has increased since the 1980s. Norway is an extreme case: The value of the PEI rose almost 100 per cent, from 6.8 per cent of the GDP in 1980 to 13.4 per cent in 2007. However, this increase is primarily due to the large increase in turnover by a few big state-owned oil companies in the 1990s. Between the extreme examples of the United Kingdom on the

Figure 2.2 Levels of public entrepreneurship in 20 countries, 1980–2007

Norway

Sweden

France

Finland

05

1015

Pub

lic E

ntre

pren

eurs

hip

Inde

x

1980 1990 2000 2010

Year


one hand and Norway on the other, we find countries like Switzerland and Denmark where the extent of privatization has been quite moderate.

As we see in Figure 2.3, the state has almost completely withdrawn from public enterprises in Anglo-Saxon countries, whereas governments have remained highly involved in entrepreneurial activities or have even expanded their roles in Northern Europe and only partially withdrawn in other areas of continental Europe.4 Rather surprisingly, the countries with the largest public enterprise sectors in 1980 were not necessarily the ones that privat-ized the most. For example, all English-speaking countries launched compre-hensive privatization programmes, but the extent of public involvement in their economies in 1980, before the privatizations, varied widely. Whereas Canada and Australia had relatively low PEI values of 2.4 per cent and 3.6 per cent of GDP, respectively, Ireland had an initial value of 13.6 per cent and the United Kingdom had a value of 7.6 per cent. Irrespective of the size of the state-owned enterprise sector, the governments in these countries apparently considered privatization an effective policy for attaining their micro- and macroeconomic objectives. Furthermore, in 1980 both Southern European and Scandinavian countries had moderate levels of public entre-preneurship, but they have pursued highly different policy trajectories, with Southern European countries almost completely retreating from entrepre-neurial activities and the Nordic countries maintaining a strong state influ-ence in their national economies.

A breakdown of the changes in public entrepreneurship by sector is also revealing. Notions of what constituted a strategic industrial sector and where

Figure 2.3 Change in public entrepreneurship, 1980–2007


the state should intervene had differed widely across countries. For example, the French state was and still is deeply involved in the aerospace industry, whereas the Austrian government was involved in heavy industry but has divested most of these firms. Although most of the rich democracies had opted for comprehensive public control of the network-based service sectors, technological change and the rise of the neoliberal paradigm challenged per-ceptions of the political and strategic value of public service provision to varying extents.

Figure 2.4 shows the privatization trajectories in the telecommunications, postal and railway sectors, all of which had been operated at the national level. The y-axis indicates the number of countries that have started pri-vatization processes in these sectors. The dashed line shows the increase in the number of countries that have transformed a public corporation into a joint stock company (formal privatization), the solid line indicates the increase in the number of countries that have started the substantial pri-vatization process and the dotted line shows the increase in the number of countries that have completely divested the respective company. A massive retreat from public involvement in direct service delivery in these sectors is apparent. Interestingly, formal rather than substantial privatization is the most common type of privatization: In the railway and postal sectors, most countries have transformed the public utility provider into a joint stock company, but only a minority have started the substantial privatization process.

We also see some remarkable cross-country and cross-sector differences in the privatization trajectories of these public utilities. The most exten-sive privatizations occurred in the telecommunications sector: All 20 countries have now formally privatized their providers and commenced the substantial privatization process, and in ten countries, the telecom-munications provider is already completely divested to private investors. In the railways sector, however, only 14 countries have implemented for-mal privatization, a handful have begun substantial privatization, and only New Zealand, the United Kingdom and Japan have fully divested their public shares. Privatization activities in the postal sector are even less pronounced: Most countries started the privatization process later than they did in the other two sectors, and none of them has completely divested its postal provider. Only European Union (EU) member states have sold public shares in the postal sector, whereas formal and sub-stantial privatization of telecommunications is a general trend, possibly because divesture of telecommunications providers is highly profitable and provides a good opportunity for raising public revenues. Most of the English-speaking countries were early to privatize, especially in the telecommunications and railway sectors, while the Scandinavian and German-speaking countries tended to privatize their public utility pro-viders relatively late.


CAN

UKJPN

IRENZL

NELDEN

AUSPOR

SWENOR

BEL

BELGER

FRAFIN

SWI

SPA

CANUK

JPNNZL

DENNEL

POR

IREGER

AUSFRA

AUT

SWI

SWENOR

CANNZL

UKSPA

DENIRE

PORITA

NELAUS

AUT

GRE

SPA

ITA

GREBEL

ITA

FIN

0

5

10

15

20C

umul

ativ

e N

umbe

r of

Cou

ntrie

s

1980 1990 2000 2010Year

Telecommunications Sector

CANNZL

NEL

BELPOR

SWEGER

AUTGRE

ITA

SPAFINUK

NORDEN

JPN

NELGER

ITA

DENBEL

GREAUT

0

5

10

15

20

Cum

ulat

ive

Num

ber

of C

ount

ries

1980 1990 2000 2010Year

Postal Sector

CAN

GREJPN

SWENZL

AUSITA

UK GERNEL

FINSWI

NORAUT

JPNNZL

CANUK

AUS

NZLCAN

UKAUS

0

5

10

15

20

Cum

ulat

ive

Num

ber

of C

ount

ries

1980 1990 2000 2010Year

Formal Privatization Start of Material Privatization

Complete Privatization (public shares = 0 %)

Railway Sector

Figure 2.4 Privatization trajectories in public utilities


Explaining the fall of public enterprises

We used panel data regressions to ascertain the relative importance of the determinants of privatization in the economy as a whole, and in the public utility sectors in particular (Table 2.1). The dependent variable is the PEI in two forms: first, calculated for all public enterprises, and second, calculated for the public utility sectors exclusively. The independent variables are taken from the major schools of thought in comparative public policy research on factors influencing privatization. These include both international and domestic factors, as described below.

According to the efficiency thesis, economic globalization exerts strong pressures for minimizing state involvement in economic and social affairs. Public companies are rarely able to compete in the global market, and privat-ization of state-owned enterprises is considered a necessary precondition for growing economic efficiency in an increasingly competitive international environment. We use trade openness – the sum of exports and imports as a percentage of GDP – as an indicator for economic globalization (Heston et al. 2012). We expect that higher levels of economic integration will be associ-ated with lower levels of public entrepreneurship (Schneider and Häge 2008; Zohlnhöfer et al. 2008; Obinger et al. 2015).

Membership in the EU may also influence privatization activities. The EU does not directly demand that members divest public enterprises, but it contributes to the retreat of the state as an entrepreneur in several indi-rect ways. First, the Single Market Programme required the liberalization of many regulated sectors. Market-building delegitimated public ownership and made the selling off of public enterprises more likely (Schmidt 1998; Clifton et al. 2006; Schneider and Häge 2008). Second, the deficit criteria of the Maastricht Treaty forced governments to contain budget deficits, and the privatization of public companies can generate new revenues at relatively low political costs compared to those associated with other policy options such as tax increases and spending cuts. And finally, the EU’s rigid state aid regime has curtailed the opportunities for governments to pay subsidies to enterprises. EU membership is measured with a dummy variable, set to one if a country is a member and zero otherwise. We expect EU member states to privatize to a greater extent than their non-EU counterparts (Schneider and Häge 2008; Zohlnhöfer et al. 2008).

A country’s general economic situation and level of development may influence the level of public entrepreneurship, as we might expect economic reform pressure to be lower in rich countries than in poorer ones. We use the log of the per capita GDP as an indicator of a country’s economic affluence (Heston et al. 2012).

Another factor that might push governments towards privatization is the level of public debt, as privatization is a relatively easy way to raise revenues for the public purse in times of austerity. The privatization launched by the


Table 2.1 Determinants of privatization

Variable Economy as a whole Public utilities only

I II III IV

Trade openness −0.0219***(0.00654)

−0.0450***(0.00748)

−0.00837***(0.00267)

−0.0251***(0.00320)

EU membership 0.0836(0.307)

0.143(0.367)

−0.0277(0.149)

0.0825(0.154)

Per capita GDP (log)

−1.123**(0.532)

−1.449***(0.492)

−0.651**(0.280)

−0.963***(0.317)

Public debt −0.0193***(0.00352)

−0.0181***(0.00294)

−0.00758***(0.00181)

−0.00989***(0.00143)

Left-leaning cabinet

0.00135(0.000919)

0.00163**(0.000826)

0.000791*(0.000414)

0.000834**(0.000396)

Union density 0.0536***(0.00852)

0.0373***(0.0127)

0.0178***(0.00485)

−0.00332(0.00785)

Institutional veto points

0.229(0.444)

0.258(0.504)

−0.0655(0.317)

−0.306(0.325)

Country dummies No Yes No YesR2 0.354 0.736 0.302 0.683Wald Chi2 76.37*** 5,265.39*** 54.98*** 7,483.22***N 485 485 485 485

*** z, p < 0.001, ** z, p < 0.01, * z, p < 0.05; panel-corrected standard errors in parentheses.

Greek government in 2013 is a case in point. For this variable, we use the government’s gross financial liability as a percentage of GDP (Armingeon et al. 2011).

Not only economic factors but also the preferences of political actors influ-ence privatization. A left-leaning cabinet is typically more reluctant to privat-ize than its right-wing counterpart would be. Employees of public enterprises belong to the core clientele of social democratic parties, and privatization will likely deprive them of their job security. Left-wing parties are also ideologi-cally more committed to public interference in economic and social affairs than right-wing parties and less inclined to privatize (Boix 1997; Obinger et al. 2015). The strength of the left in government is measured by the cabinet share of left-wing parties (Armingeon et al. 2011).

Trade unions are also likely to oppose privatization, for fear that it will cause a loss of jobs and deterioration of working conditions. This factor may be particularly important in the public utility sectors where the rate of unionization is exceptionally high. For this variable, we use union density, or the net union membership, as a percentage of wage and salary earners (Armingeon et al. 2011). We expect that strong trade unions are associated with high levels of public entrepreneurship.


A last variable that might affect privatization is the institutional environ-ment in which policy-makers operate. Institutional veto points may impose constraints on privatization and increase the related transaction costs. We use the index compiled by Henisz (2010) to control for institutional constraints that may impede major privatization initiatives.

In order to mitigate problems of endogeneity in the statistical model, all independent variables are lagged by one year. The results of the regres-sion for four models are shown in Table 2.1. Models I and II are based on the PEI for the overall involvement of the state in the economy, and Models III and IV are based on the index for the public utility sectors exclusively. Models I and III include country dummies, whereas Models II and IV do not.

Overall, the results of the regression models for the public utility sectors are very similar to those for the entire economy. The findings strongly sug-gest that economic globalization is a significant determinant of privatization. The coefficient for trade openness is negative and statistically significant at the 0.1 per cent level in all models. The more a country is integrated into the global economy, the lower the level of public entrepreneurship: Growing economic openness clearly generates pressure on governments to retreat from entrepreneurial activities. This relationship holds across and within countries. In keeping with previous empirical studies, public involve-ment in the economy is generally lower in rich countries (for instance, Bortolotti et al. 2003). As expected, high levels of public debt also accelerate privatization; the coefficients for public debt are highly statistically signifi-cant in all models.

The results for the actor-related variables reveal that strong left-wing gov-ernments consistently impede privatization. The coefficients are positive and, with the exception of Model I, statistically significant. The reluctance of left-wing governments to privatize seems to be stronger in the public util-ity sectors than in the overall economy (see Model I versus Model III). When analysing the within-country variance (Models II and IV), however, the influence of left-wing governments is very similar. When the participation of leftist parties in government decreases in a country, the level of public entre-preneurship also decreases. As expected, trade union density is also a crucial factor when it comes to privatization. The coefficient is positive and statisti-cally significant in the first three models. This means that a strong, organ-ized labour force is associated with a high level of public entrepreneurship. In the fourth model, the coefficient is statistically insignificant, indicating that the strength of trade unions matters less when looking at the variation of public entrepreneurship over time in the public utility sectors; this may be because the strength of trade unions within the public utility sectors has remained relatively constant over time. EU membership and political insti-tutions show no statistically significant effects whatsoever on the extent of public entrepreneurship.


Conclusion

This chapter was concerned with the factors accounting for the rise and transformation of the state-owned enterprise sector in Western democracies. We have seen that some of the same factors that motivated government intrusion in economic affairs historically can also explain the recent retreat of the state from entrepreneurial activities. Raising revenues and promoting economic growth were motives for both the nationalization and the pri-vatization of public enterprises. Other historic factors behind the formation of public corporations simply became obsolete over time and thus paved the way for privatization. Military interests in the age of mass warfare and the consequences of the two world wars were important drivers for the for-mation of state-owned railways and mining companies, but the changed nature of warfare and the end of the Cold War have rendered these compa-nies meaningless for the military. In a similar vein, technological progress in some sectors has undercut the long-established notion that network-based industries are natural monopolies.

The rise and transformation of public enterprises is best exemplified by public utility sectors: These were privately owned and subject to public regulation in the mid-nineteenth century, and were nationalized over the following hundred years in almost all OECD countries. Promoting public welfare was a key motive behind this development. In the past three decades, however, public utility providers have been sold off or formally privatized, and the situation is similar to what it was in the middle of the nineteenth century, with governments acting as regulators. The public utility sectors have thus witnessed a transformation of state intervention, but not a mas-sive government retreat as in the industrial sectors.

Yet what are the consequences of privatization? Has it produced the intended outcomes? According to its advocates, privatization should increase a company’s efficiency, improve the quality of service provided to consum-ers and help to balance public budgets. Opponents fear that employees are worse off after privatization.

Studies indicate that while the efficiency of firms has by and large improved (Megginson and Netter 2001; D’Souza et al. 2005), privatizing public utilities generally does have negative consequences for employees. Many public util-ity providers were overstaffed, often for political reasons, and the number of employees was reduced after privatization. In contrast to conventional wis-dom, however, it is not the divestment of network-based utilities to private investors that incurs the loss in employment, but rather the restructuring and formal privatization while the state is still the sole shareholder (PIQUE 2009; Schmitt 2013).

Studies also reveal a mixed picture when it comes to the effects on the con-sumer of privatizing public utilities. Consumers are better off after privatiza-tion in the telecommunications sector (Schmitt and Schuster 2010), but in


water supply, postal services and most other utilities sectors consumers do not benefit (Hall 1997; Schuster 2013).

With regard to raising revenues for the public purse, privatization seems, at first glance, to be an appropriate instrument. A closer look, however, shows that a few specific, very lucrative firms – mainly telecommunication providers – account for the lion’s share of revenues, and most divestures yield less than expected. With the exception of telecommunications, privat-izing public utilities has not produced the intended revenues. Furthermore, most of the effects are produced by formal privatization, with the ownership structure playing a minimal role.

Our empirical analysis ended just as the global economic crisis was start-ing. Like all previous emergencies, this crisis led to company bailouts, most notably in the financial sector. In our view, however, the nationalizations that resulted are only temporary. The global credit crunch has produced a severe fiscal crisis that will give rise to a long period of austerity in several OECD countries. Based on our findings, we expect that the mounting fiscal problems will push the pendulum back towards privatization in the years to come.

Appendix

The PEI is calculated as follows:

IR R R s

i tj j j j

i t

,, , , , , , , ,

,

=+ + ×i t i t i t i t

DA PC SC SC

GDP∑ ∑ ∑α β

DA: set of departmental agenciesPC: set of public corporationsSC: set of state companiesRj,i,t: (total) turnover of a company j in a country i at time tsj,i,t: shares held by the state

The index captures the type of organizational form (DA, PC, SC) and the per-centage of shares owned by the government (s) on an annual basis, and com-bines this information with the companies’ turnover in the given year (R). When the state transforms a departmental agency into a public corporation, then RPC is weighted with a (here RDA and RSC are zero). a has to be smaller than one to indicate the retreat of the state and the enterprise’s greater autonomy from political actors. The weighting for a transformation into a joint stock company is b. Since the possibilities for influencing the operational decisions of a joint stock company decrease for political actors in comparison to a public corporation (even though the state remains the unique shareholder), b should be smaller than a. If the state additionally sells public shares (substantial privatization), the index value further decreases. When, for


instance, 49 per cent of the public shares are divested, the weighting equals b × 0.51, as the state still holds 51 per cent of the shares. Once a firm is completely privately owned (s = 0), it drops out of the index. If more than one publicly owned firm operates in the sector, the index sums the weighted outputs over all firms. The weighted outputs are finally set in reference to GDP. Formal and substantial privatization is weighted equally, whereas for-mal privatization is subdivided into two different types. This means that a equals 0.75 and b 0.5. Since no theoretical justification for the selection of a and b exists, sensitivity analyses were applied using different weightings. The results do not differ substantially when using different weightings.

Table 2A.1 Public Entrepreneurship Index

Start value 1980

End value 2007

Change 1980–2007 (per cent)

Mean 1980–2007

SD 1980–2007

Australia 3.55 0.48 −86.48 2.42 1.04

Austria 7.75 3.03 −60.90 6.22 2.09

Belgium 4.70 1.92 −59.15 3.51 1.13

Canada 2.41 0.55 −77.18 1.45 0.85

Denmark 4.38 2.74 −37.44 3.41 0.79

Finland 8.63 6.93 −19.70 7.67 1.36

France 9.55 5.38 −43.66 8.32 1.99

Germany 3.21 1.41 −56.07 2.32 0.73

Greece 5.21 1.28 −75.43 2.90 1.30

Italy 6.45 2.17 −66.36 4.58 2.00

Ireland 13.71 1.83 −86.65 6.30 3.74

Japan 4.30 1.20 −72.09 2.75 0.90

Netherlands 7.83 2.20 −71.90 4.61 2.34

New Zealand 7.63 3.78 −50.46 3.95 2.37

Norway 6.82 13.36 95.89 11.66 1.62

Portugal 5.57 0.90 −83.84 2.82 1.70

Spain 5.24 0.71 −86.45 2.61 1.70

Sweden 6.10 7.89 29.34 6.36 1.36

Switzerland 4.35 2.74 −37.01 4.23 1.01

UK 7.65 0.44 −94.25 2.45 2.53

Sample 6.25 3.05 −51.20 4.53 1.63

Source: REST database.


Notes

1 Wartime destruction of housing also led to post-war municipal and central state initiatives designed to increase the supply of public housing.

2 Calculation of the index is described in detail in the Appendix.3 We gathered full-time series on the two largest quintiles of public enterprises in

terms of turnover. The enterprises covered are responsible for at least 95 per cent of the turnover of all public enterprises. All monetary values are deflated to 2005 constant prices.

4 Table 2A.1 in the Appendix lists the index values and per cent change.

41

3The Competing State: Transformations of the Public/Private Sector Earnings Gap in Four CountriesMarkus Tepe, Bernhard Kittel and Karin Gottschall

In the ‘Golden Age’ of the modern state, working for the state was a special kind of employment that came with exceptional rights, obligations and remuneration schemes. Employment conditions of public employees, associated with the Weberian bureaucratic ideal, entailed guaranteed lifetime employment, defined pay scales based on formal education and seniority, and standardized, often fairly predictable, career trajectories.

These features, in combination with union-negotiated pay scales, have two empirically observable implications (Card 1996; Rueda and Pontusson 2000). First, average wages are higher in the public sector than in the private sector due to floors on the lower wage scales, which apply to the majority of employees. Second, the distribution of wages is more compressed in the public sector than in the private sector due to limits to deviations – be they upwards or downwards – from the uniform pay scales that apply to all public employees. As a result, in the lower ranks public sector wages are generally higher than private sector wages, while the reverse holds for higher eche-lons. At lower ranks, the public sector is attractive on account of both higher wages and generally better employment conditions including, for exam-ple, life-term employment and fixed career paths. At the higher echelons, however, employees are faced with a trade-off between lower salaries and the aforementioned attractive elements of employment conditions. In this niche of the labour market, public employment is attractive to a specific type of worker who has been characterized either negatively as a bureau-crat (DeHart-Davis 2007) or positively as a worker with a high public service ethos and less emphasis on individual earnings (Vandenabeele 2008).

The privatization of former public services and the restructuring of public employment across OECD countries since the mid-1980s indicate that the role of the state as an employer has undergone a fundamental change (Suleiman 2003). The orientation towards efficacy as the dominating principle of public administration has been challenged by private sector management principles (New Public Management, henceforth NPM) and amended to efficiency on the list of targets of service provision by the state (Pollitt and Bouckaert 2004).

42 The Public/Private Sector Earnings Gap

This suggests that the ideal-typical bureaucratic, impartial civil servant is being replaced by a paragon of public service delivery inspired by private sector cus-tomer service principles.

The fundamental question at the centre of this chapter is whether NPM reforms have diminished the wage gap between public and private sector employment. In general, downward pressure in the lower ranks of public administration – due to service market competition – and upward pressure in the higher echelons – due to labour market competition – should result in a narrower gap between public and private wages at all levels of the pay scale. These changes, however, might be conditioned by pre-existent public employment regimes (Tepe et al. 2010). Typically, trade unions are strong in the public sector and uniform employment conditions are negotiated col-lectively, with little or no option for individual deviations from the agreed rates (Card 1996; Garrett and Way 1999; Checchi et al. 2007). The size of the wage gap depends on the extent to which public employment has been attributed a special status and the extent to which trade unions were willing and able to compress the wage scale while the TRUDI state was flourishing. Therefore the magnitude of change that NPM reforms are able to induce in a particular public employment regime is expected to be conditioned by the institutional administrative tradition in general and the strength of public sector trade unions in particular.

In this chapter, we explore the gap between public and private wages in four countries (Germany, France, Sweden and the United States) at two points in time (1994/5 and 2004/5), using labour income data from the Luxembourg Income Study (LIS). In methodological terms, the question is whether differences in public and private sector employees’ earnings arise from differences in individual characteristics (for example, age, education, occupation) or whether they reflect the distinct feature of public pay policies and employment regimes related to the administrative tradition. To answer this question, we use statistical tools to estimate and decompose conditional wage differentials.

The transformation of public pay policies

There is a considerable amount of evidence that average public sector earn-ings so far have exceeded private sector earnings. The distinct feature of the public/private sector earnings gap is that its sign and magnitude vary across the earnings distribution (Disney and Gosling 1998; Gornick and Jacobs 1998; Melly 2005; Ghinetti and Lucifora 2008). In line with the argument outlined above, at the low end of the earnings distribution public employees earn more than their private sector counterparts, whereas at the high end of the earnings distribution they earn less. Additionally, some evidence sug-gests that the gender pay gap in the public sector is less pronounced than in the private economy (Gornick and Jacobs 1998, 688). These features of

Markus Tepe, Bernhard Kittel and Karin Gottschall 43

the public/private sector earnings gap have been attributed to the pursuit of fairness and equality in public pay policies (Melly 2005).

For the United States, early studies by Smith (1976, 1977) report that public sector earnings exceed private sector earnings and that this premium is larger for female than for male public sector employees. Further studies by Heller and Tait (1983), Pedersen et al. (1990) and Rose (1985) also indi-cate that public sector workers tend to earn more than their private sector counterparts in a range of countries (Gornick and Jacobs 1998, 694). For Germany, Dustmann and van Soest (1997) find that although mean earnings are higher in the public sector for both men and women, conditional on education, marital status and age, wages are higher in the private sector for males but higher in the public sector for females. This effect has been found for the public/private sector earnings gap in various countries (Poterba and Rueben 1995; Disney and Gosling 1998; Mueller 1998; Nielsen and Rosholm 2001; Melly 2005). Further studies have either compared the public/private sector wage gap between countries (Lucifora and Meurs 2006; Giordano et al. 2011) or explored the evolution of the public/private sector wage gap within a single country over time (Bargain and Melly 2008; Lilla and Staffolani 2009). Only a few studies have explored the temporal stability of the public/private sector earnings gap from an explicitly comparative perspective (for an exception, see Gosling and Lemieux 2004).

In order to describe how the adoption of NPM-related pay policies and the affiliation to a public employment regime might shape the public/private sec-tor earnings gap, we distinguish two stylized types of change in the function that describes the public/private sector earnings gap across the labour income distribution. These two stylized types of change are represented in Figure 3.1. The x-axis represents five percentiles of the labour income distribution; these are the 10 per cent, 25 per cent, 50 per cent, 75 per cent and 90 per cent quantiles. The y-axis measures the conditional public/private labour income differentials (in percentage points). Whereas zero represents the case in which there is no public/private sector gap, positive values indicate that earnings for public employees are higher than for their private sector counterparts, and negative values of the labour income differentials imply the opposite.

First, a shift in the overall position (or constant) of the function describing the public/private sector earnings gap across the earnings distribution is illustrated in Figure 3.1(A). The public sector wage premium is represented by two grey triangles. Moving the function upwards from A to B increases the public wage premium from the 10 per cent quantile towards the 75 per cent quantile. Conversely, we can describe the corresponding change in the size of the negative public wage effect below the flat line. Second, changes in the slope of the function describing the public/private sector earnings gap across the earnings distribution are illustrated in Figure 3.1(B). In this case, a shift from A to B increases the steepness of the function, which leads to a higher public wage premium among those in the low income quantiles and


an increase in the public wage deduction for those in the high income quan-tiles. Third, we may observe combinations of both types of changes, and since the function describing the public/private wage gap across the earnings distribution need not be linear, changes may look like those represented in Figure 3.1(C).

In the next section, we focus on two aspects that might shape the public/private sector earnings gap: First, the application of NPM over time is expected to affect the slope of the public/private sector earnings differen-tials. Second, the public employment regime is expected to condition the overall position and slope of the function describing public/private sector earnings differentials.

New Public Management: Dismantling the TRUDI model

Since the 1980s, all countries have been confronted with a new model for the provision of state services. NPM calls for a ‘modernization’ of the public sector according to the organizational principles of the private sector (OECD 2001a, 2001b, 2005b). The aim of modernizing public administration is the transformation from a bureaucratic to a professional provision of services.

Figure 3.1 Stylized changes in public/private sector labour income differentials

0

1

–1

Pub

lic /

Priv

ate

Sec

tor

Wag

e D

iffer

entia

l

Pub

lic /

Priv

ate

Sec

tor

Wag

e D

iffer

entia

l

Pub

lic /

Priv

ate

Sec

tor

Wag

e D

iffer

entia

l

Labour Income Quantile

0.50.1 0.90.750.25

0

1

–1

Labour Income Quantile

0.50.1 0.90.750.25

A

B

A

B

B) SlopeA) Position

low high low high

0

1

–1

Labour Income Quantile0.50.1 0.90.750.25

A

B

C) Position + Slope

low high


The core of the new orientation is made up of decentralizing human resource management, introducing performance reviews and performance-related pay, increasing flexibility of working hours and conditions, and reforming recruitment and training procedures (Reichard 1999, 2005; OECD 2005a). Both the direction and the extent of these reforms have been the subject of much scholarly investigation (Bekke and van der Meer 2000; Pollitt and Bouckaert 2004; Blanke et al. 2005). Yet little attention has been paid to the question of how these reforms challenged the state as an employer and, in particular, whether these reforms have led to any changes in the public/private sector earnings gap.

The rise of efficiency-oriented principles has challenged the state as an employer in at least three ways. First, the monopoly of the state as a pro-vider of public services has been questioned. The outsourcing of tasks and the privatization of service provision have eliminated public employment in whole sectors (Rothenbacher 1997, 1998). This implies that employment conditions are regulated by private law. Second, some sectors have been opened up for private companies, often by way of mandatory competitive tendering, as, for example, in the United Kingdom and the United States. In this context, public agencies offer their services under the condition of price competition from private companies and may not simply recover the costs of service provision by transferring them to citizens through tax funding or service fees. As services rely heavily on manpower, labour costs are a major determinant of the price at which services can be offered and thus market competition is translated into pressure on labour costs. Third, the state not only competes on the service market but also on the labour market. Framed in terms of the principal–agent problem (Lane 2005), NPM reforms imple-ment policies such as performance-related pay, position-based career oppor-tunities and fixed-term contracts in order to elicit worker behaviour in line with efficiency-oriented targets. To the extent that such policies are imple-mented, the profile of public employment conditions approximates that of the private sector. As a consequence, the hitherto rather unconnected labour markets in terms of the composition of supply and demand tend to merge, and the same type of worker is sought after in both the private and public sectors. Also, given higher pressure on labour costs, efficiency considera-tions play a larger role in recruitment strategies, thus impairing ambitions of the state to serve as a model employer with regard to groups that are typi-cally disadvantaged in the private labour market, such as women, minorities or disabled persons.

The removal of privileges and peculiarities and the increased flexibility are expected to decrease the gap between the public and private sectors (Reichard 2005; Czerwick 2007). At the high end of the earnings distribution, one of the core claims in NPM has been the implementation of performance assessments and performance-related pay. Performance assessments serve to measure individual and collective efforts in an objective and transparent manner


with a view to strengthening employees’ work effort (OECD 2011, 128). Performance-related pay concerns the remuneration of public employees’ work effort and is considered to be a paradigmatic element of NPM reforms (Dahlström and Lapuente 2010, 577). Performance-related pay establishes a system of bonuses or merits applied to public employees’ basic pay, whereby the intensity and use of incentives can vary according to staff positions (OECD 2011, 128). This should affect high-skilled jobs more than low-skilled employment and might increase the attractiveness of state employment for highly skilled workers and professionals if the state is competitive enough as an employer. Thus, in this segment of the earnings distribution, the state’s main challenge is to maintain competitiveness in the labour market.

At the low end of the earnings distribution, NPM-induced reforms might have a contrary effect on the public/private sector earnings gap. Policies such as contracting out and the encouragement of competitive tendering are expected to reduce the public wage premium at the bottom of the earnings distribution and might render state employment less attractive for low-skilled workers. In this segment, the main concern of the state as an employer is not to attract qualified and motivated personnel, but to keep personnel costs low in order to remain competitive in the market for public services.

Public employment regimes

The establishment of public employment as a distinct employment cat-egory during the ascent of the TRUDI state must be understood in the context of the respective national administrative traditions and the result-ing public employment regimes. The term ‘administrative tradition’ has been broadly used to bring ‘together several characteristics of administra-tive systems’ and ‘demonstrates how these elements fit together to cre-ate more or less coherent institutions’ (Peters 2008, 118). Applying this concept to public sector employment relations, the characteristic elements of public employment regimes are the coordination of public sector bar-gaining, the strength of public sector unions, the scope and intensity of performance-related pay policies and the existence of senior civil ser-vices (Tepe et al. 2010, 18). Painter and Peters (2010, 19) distinguish four Western administrative traditions: Napoleonic, Germanic, Scandinavian and Anglo-American.

The Anglo-American, or so-called public interest, tradition is associated with more ‘open’ career schemes (Dahlström and Lapuente 2010, 584). It is also presumed to be relatively proactive towards public sector modernization inspired by NPM (Pollitt and Bouckaert 2004). In this regime context, trade union membership rates tend to be low. In the United States, 35 per cent of those working in the public sector are organized in trade unions (Table 3.1). Given these characteristics, NPM reforms face little ideological resistance in society or, more specifically, resistance from organized labour in the Anglo-American public employment regime. Hence this regime will serve as the


point of reference for the three European civil law-based public employment regimes.

The German administrative tradition is founded on the Prussian concept of the state based on the rule of law (Rechtsstaat), which leads to tight limits on the discretion of officials but also protects them from political influence. A formal qualification in legal studies has, for a long time, been a prerequi-site for access to higher administrative positions. Civil service law itself has become a highly developed, specialized branch of administrative law. The German administration, characterized by its ‘tall hierarchy of positions, func-tional specialization, strict rules, impersonal relationships, and a high degree of formalization’ (Röber 1996, 170), may be considered a close realization of the Weberian ideal-type bureaucracy.1 Public employment regulations are articulated in line with this high level of formalization. Employment condi-tions for public employees are negotiated between the state and the public sector union, while those of civil servants are laid down unilaterally by law, typically after consultation with personnel representatives. Fifty per cent of those working in the German public sector are union members, which is about ten per cent higher than for private sector employees (Table 3.1). While civil servants have no right to strike, public employment relations

Table 3.1 Composition of public employment

Country

Size of public employment (in percentage points)

YearTotal share of

public employmentFemale share of

public employment

Germany (DE) 1994 27 522004 25 54

France (FR) 1994 30 572005 28 58

Sweden (SE) 1995 36 732004 36 72

United States (US) 1994 18 542004 18 55

Trade union membership (in percentage points)

Private sector Public sector Delta

DE 40 51 11FR 19 43 23SE 78 89 12US 8 35 27

Note: The composition of public employment is measured as a share of all full-time and part-time employment, using normalized person weight.Sources: LIS; ISSP 2009 (ZA5400: Social Inequality).


tend to be characterized by a consensus-seeking orientation and a tradition-ally strong position of personnel representatives. Under these conditions, both the size of the average wage gap and the differential effect of public employment for different levels of employment are large. Moreover, both the legalistic tradition and the strength of labour in the public sector should limit the extent to which NPM reforms affect employment conditions. It is thus doubtful whether the expectation of a narrowing public/private wage gap applies in Germany.

The Napoleonic administrative tradition is grounded in a strong centralist state. It is characterized by the principles of a nationally uniform adminis-trative structure, the concentration of power at the level of the central state, more precisely within the ministerial departments, and the supremacy of the central state over local administration (Meininger 2000). The seniority-based wage system maintains a strong civil service with the ‘fonctionnaire’ category covering the majority of public employees (Kroos et al. 2011). The civil service is organized into distinct and separate ‘corps’ with fixed pay scales and hierarchical, elitist and strongly meritocratic career paths that are densely intertwined with management positions in state-owned enter-prises. Trade unions are fragmented and rather poorly organized but highly influential in the public services due to the civil servants’ right to strike, which is frequently used in the context of strong inter-union competition and typically confrontative employment relations. Even though the level of union membership among public sector employees is ten per cent lower than in Germany, there is a sharp difference in trade union membership rates between public and private sector employees in France. Compared to private sector employees, trade union membership rates are about 20 per-centage points higher in the public sector (Table 3.1). In view of the strongly hierarchical conception of public services, along with the close connections with management positions, the average wage premium of the public sector should be present but less pronounced than in Germany. Also, the public/private wage differential curve should be flatter due to steeper wage scales in public employment which more closely match those of the private sector.

In the Scandinavian administrative tradition, the state also has a strong legal foundation (Painter and Peters 2010, 23). The centralized Swedish administration exists alongside the very influential regional and local admin-istrations (Jahn 2003). The Scandinavian administrative tradition may be described as co-operative underpinned by corporatism with a high level of state intervention. Sweden has developed a legalistic–corporatist adminis-trative culture. Since a thorough reform of the Swedish public employment regime took place in 1965, public employment conditions have been nego-tiated between the union and the government. Subsequently, employment conditions in the public and private sectors have been aligned, with the result that by the 1990s the public and private sectors constituted a unified employment regime. Swedish trade unions are well-organized and dominated


by one peak association which has a strong tradition of emphasizing pay equality in its wage policy. Trade union membership rates are high in both the public and private sectors, although membership rates in the public sector are still about ten per cent higher than in the private sector (see Table 3.1). Only a small number of specific public service positions have the special civil servant status, while the large majority of public employees have contracts similar or identical to private sector equivalents. As a result, the wage pre-mium – if any – of the public sector should be negligible, and the differential public/private wage gap should not be present (represented, for example, by a flat, horizontal line).

Theoretical expectations: Regime-specific reform paths?

Combining our theoretical considerations on NPM with reflections on the role of public employment regimes, we may expect the following empirical observations. First, even though the specific position and slope of the public/private sector wage gap ought to vary across public employment regimes, at the starting point of our comparison (mid-1990s) we expect to find the char-acteristic negative slope for the function describing the public/private sector wage gap in all four regimes. At the low end of the earnings distribution, public employees should earn more than their private sector counterparts, whereas at the high end of the earnings distribution, they should earn less. The regime-specific intensity of the public/private sector wage gap should ini-tially correspond to the strength of public sector trade unions and their abil-ity to compress the earnings distribution while the TRUDI state prospered.

Second, in the wake of NPM, the baseline expectation is that employment sectors converge, with public employment pay schemes more closely aligned with private employment pay schemes. At the top of the earnings distribu-tion, the use of performance-related pay policies ought to reduce the nega-tive public/private earnings differential, whereas at the bottom competitive tendering should have reduced the public sector wage premium. Hence over time the slope of the function describing the public/private sector earnings gap should converge towards zero.

Third, only if NPM ideas have been implemented regardless of the dif-ferent inherited national systems of public employment should we expect to see an identical upward shift in the slope of the function describing the public/private sector wage gap in all four regimes. Alternatively, national administrative traditions may be expected to shape actors’ attitudes towards change and consequently the profile of the public employment regimes. Pollitt and Bouckaert (2004, 3) have already pointed out that many West European countries, while having resisted a wide-scale implementation of NPM, can nevertheless not generally be characterized by a high level of resistance to reform; rather, they usually pursue their own models of mod-ernizing public administration. The authors distinguish between a reform path inspired by NPM and a second, ‘neo-Weberian’, reform path (2004,


93–102). Whereas in the first path the classic bureaucratic regulation and performance mechanisms are replaced by market mechanisms, in the sec-ond ‘the classic role of state, representative democracy and bureaucratic administration is in a dialectical sense abolished and political-administra-tive action is supplemented with new elements’ (Schnapp 2004, 343). Thus, in the Scandinavian administrative context, we would expect the function describing the public/private sector earnings differentials to have a slope of zero, compared to the Anglo-American tradition where we expect a strongly negative slope. Furthermore we would expect that the Napoleonic and the German regimes represent intermediate cases, both in terms of slope and position.

The public/private sector earnings gap in four countries

The choice of countries investigated is based on two concerns. The first is to concentrate on states with a state tradition that was challenged by NPM and where NPM ideas cannot easily be integrated (Germany, France and Sweden); the second is to contrast these countries with a case in which NPM ideas had relatively free rein (the United States). Each country may thus be considered to represent an ideal-type administrative tradition (Germanic, Napoleonic, Scandinavian and Anglo-American). The two points in time chosen ( mid-1990s and mid-2000s) are a compromise between our aim to compare data points before and after the big wave of NPM-inspired reforms in Western countries and the availability of comparable data.

Explorations of the public/private sector earnings gap require detailed income information, which is not usually available in general population sur-veys such as the International Social Survey Program (ISSP) or the European Social Survey. The LIS, a cross-national database of micro-economic income data, provides such information.2 The empirical analysis relies on eight data sets from the fourth (1994–1996) and the sixth (2004–2005) wave of LIS data. Whether ten years is a sufficiently long time period for NPM reforms to materialize is an open question. The initial sample selected in each country included all full-time and part-time employees, excluding the agricultural sector and the self-employed. Employed individuals were then coded as being employed in either the public or the private sector. Since we consider only full-time and part-time employees, the results of the analyses must be interpreted as being conditional on the selected samples.3

The ideal dependent variable would be an individual’s gross or net hourly wage rate. This information, however, is not available in the LIS database for the four countries and two points in time under consideration. For the pur-pose of this study, we use the individual-level monetary labour income data. In the LIS database, all incomes are harmonized to annual amounts, irrespec-tive of the reference period in the original surveys. The dependent variable is defined as the natural log of an individual’s annual gross monetary labour


income. Information on income taxes and social contributions are not avail-able for all four countries and the two points in time. As long as there are no reasons to assume that taxation between public and private employees differs, the use of gross monetary labour income ought to provide sufficient insights into the public/private sector earnings gap.4 In order to obtain com-parable information on labour income, we converted labour income into US dollars and adjusted for inflation.

All statistical models include a set of control variables accounting for dif-ferences in individual productivity. The respondents’ educational attain-ment and occupation is coded as a series of dummy variables: Individuals were coded as having attained low, medium or high levels of education (using country-specific educational standards) and as being employed in one of three broad occupational groups: professional/managerial, skilled sales/clerical/service or elementary blue-collar. Moreover, we include con-trol measures for marital status, the respondents’ age and two measures of employment intensity, a dummy indicating part-time employment and the annual weeks worked. The selection of control variables and their coding is based on Gornick and Jacobs (1998, 696).5

The empirical study involves several steps of analysis, including the Oaxaca-Blinder decomposition of earning differentials (Blinder 1973; Oaxaca 1973), quantile regression (Koenker and Bassett 1978) and the Juhn-Murphy-Pierce decomposition of earning differentials (Juhn et al. 1993). All statistical mod-els were run using normalized person weights.6

Describing structural differences

In order to get an impression of the structural differences in public employ-ment across and within the four countries, we take a look at the relative share of public employment (Table 3.1) and the determinants of public employment (Table 3.2). Public employment as a percentage of all full-time and part-time employment is highest in Sweden and lowest in the United States. Germany, with a high share of part-time employment (Tepe and Kroos 2010), and France have an almost equally strong public workforce of medium size. In terms of temporal stability, there are hardly any changes in the percentage of public employees in Sweden and the United States. In the other two countries, public employment has decreased by about 2.4 per cent in Germany and 2.1 per cent in France.

With respect to the gender composition of the public workforces, the sec-ond row of Table 3.1 clearly shows that in each of the four countries the majority of public employees are women. This observation is particularly strong in Sweden, where about 72 per cent of public employees are women, followed by France with a female share of about 57 per cent. In the United States and Germany, the share of female public employees is slightly above 50 per cent. Again with respect to the two points in time, there is little evidence of structural changes over the last decade. Between 1994 and 2004,


Tabl

e 3.

2 D

eter

min

ants

of

pu

blic

em

plo

ymen

t

DE

FRSE

US

1994

2004

1994

2005

1995

2004

1994

2004

Dep

end

ent

vari

able

: Pu

bli

c em

plo

yee

(= 1

, pri

vate

em

plo

yee

= 0)

Labo

ur

inco

me

0.27

***

(0.0

6)0.

29**

*(0

.05)

−0.0

1(0

.04)

0.14

*(0

.06)

−0.3

1***

(0.0

5)−0

.67*

**(0

.06)

−0.0

1(0

.02)

−0.1

0***

(0.0

2)A

ge0.

00(0

.00)

0.01

*(0

.00)

0.03

***

(0.0

0)0.

02**

*(0

.00)

0.03

***

(0.0

0)0.

04**

*(0

.00)

0.03

***

(0.0

0)0.

02**

*(0

.00)

Fem

ale

0.84

***

(0.0

8)0.

72**

*(0

.08)

0.56

***

(0.0

5)0.

50**

*(0

.06)

1.32

***

(0.0

6)1.

29**

*(0

.06)

0.35

***

(0.0

3)0.

46**

*(0

.02)

Man

ager

0.54

***

(0.1

0)0.

28**

(0.0

9)0.

94**

*(0

.07)

0.63

***

(0.0

7)1.

78**

*(0

.07)

0.31

***

(0.0

7)0.

50**

*(0

.03)

0.47

***

(0.0

3)W

orke

r0.

28*

(0.1

4)0.

02(0

.14)

−0.9

5***

(0.1

2)−1

.28*

**(0

.16)

0.20

(0.1

3)−0

.38*

**(0

.08)

−0.0

8(0

.05)

0.06

(0.0

6)Ed

uca

tion

low

0.46

***

(0.1

1)0.

57**

*(0

.11)

−0.1

0(0

.06)

−0.1

8*(0

.07)

−0.6

0***

(0.0

8)−0

.71*

**(0

.09)

−0.6

2***

(0.0

5)−0

.94*

**(0

.06)

Edu

cati

on h

igh

0.66

***

(0.0

9)0.

60**

*(0

.08)

0.24

**(0

.08)

0.05

(0.0

7)0.

46**

*(0

.07)

1.18

***

(0.0

7)0.

51**

*(0

.03)

0.66

***

(0.0

3)M

arri

ed−0

.04

(0.0

9)−0

.03

(0.0

7)−0

.07

(0.0

6)−0

.06

(0.0

6)0.

05(0

.07)

−0.0

0(0

.05)

0.12

***

(0.0

3)0.

14**

*(0

.03)

Part

-tim

e−0

.03

(0.1

1)0.

11(0

.10)

0.36

***

(0.0

7)0.

10(0

.08)

0.12

(0.0

7)−0

.03

(0.0

4)−0

.21*

**(0

.04)

BIC

4,66

84,

144

3,51

53,

936

3,36

22,

983

3,65

63,

380

N7,

401

10,2

099,

123

9,14

511

,296

10,0

1459

,910

76,4

89

Not

e: B

eta

coef

fici

ents

fro

m l

ogit

est

imat

es u

sin

g n

orm

aliz

ed p

erso

n w

eigh

t; s

tan

dar

d e

rror

s in

par

enth

eses

; *p

< 0.

05, *

*p <

0.0

1, *

**p

< 0.

001;

ref

eren

ce

cate

gori

es: s

kill

ed w

orke

r an

d e

du

cati

on m

ediu

m.


the share of female public employees increased by 2.5 per cent in Germany and by 1.7 per cent in the United States.

Table 3.2 presents logit estimates on the determinants of public employ-ment in the four country samples in 1994/5 and 2004/5. The selection of independent variables is based on the set of controls used to estimate con-ditional labour income. First, in all four countries, age, female gender, high education and management occupations are positively associated with public employment. Second, findings for the relationship between labour income, occupation and education are mixed. Labour income is negatively associated with the probability of working in the public sector in Sweden at both points in time and in the United States in 2004. Workers were less likely to work in the public sector in France and Sweden in 2005, whereas the opposite applies for Germany in 1994. The overall picture is consistent with the specific public sector recruitment and career patterns, setting high formal entrance barriers with respect to entrance age and formal education (Wise 1996).

Oaxaca-Blinder decomposition

We employ the Oaxaca-Blinder method (Blinder 1973; Oaxaca 1973) to decom-pose mean differences in labour income between different sectors. The proce-dure divides the labour income differential into one part that is ‘explained’ by group differences in productivity characteristics and a residual part that can-not be accounted for by such differences. This ‘unexplained’ part is interpreted as a measure for the public/private sector earnings gap (Jann 2008, 1). Results of the Oaxaca-Blinder decomposition are presented in Table 3.3, reporting the average log labour income for private and public sector employees and the corresponding explained and unexplained conditional differences.7

In Germany, France and the United States, there are significant differences in mean labour income for both genders. The relative differences, how-ever, are larger for females in all these cases and at both points in time. For males, these differences are accounted for by changes in the productivity characteristics. In Germany and France in 2005 and the United States in 1994, there is a significant unexplained gap in the mean labour income for women. Whereas in Germany individual productivity characteristics explain about 50 per cent of mean differences, the explanatory contribution of these characteristics is even stronger in France and the United States. In sum, the Oaxaca-Blinder decomposition provides weak evidence for the existence of a substantive public/private sector earnings gap. However, this conclusion only applies to the mean of the labour income distributions.

Quantile regression

The Oaxaca-Blinder decomposition approach only treats the mean of the dis-tribution and ignores differences along the distribution, such as its dispersion or skewness. Previous studies have shown that the size of the public/ private sector earnings gap varies across the earnings distribution (for example,


Poterba and Rueben 1995; Disney and Gosling 1998; Mueller 1998; Nielsen and Rosholm 2001; Melly 2005). Thus the conditional mean estimates pro-vide an incomplete picture of the public sector earnings gap (Melly 2005, 506). The appropriate approach to dealing with this issue is quantile regres-sion (Koenker and Bassett 1978). The quantile regression model considers conditional quantiles as functions of predictors: ‘While the linear regression model specifies the changes in the conditional mean of the dependent variable

Table 3.3 Oaxaca-Blinder decomposition of labour income differentials

DE FR

Coef.Robust

SE Coef.Robust

SE Coef.Robust

SE Coef.Robust

SE

Male 1994 Male 2004 Male 1994 Male 2005

Private 10.76 0.02 10.43 0.02 11.43 0.01 9.99 0.01Public 10.89 0.03 10.53 0.03 11.58 0.02 10.12 0.02Difference 0.13*** 0.03 0.10*** 0.03 0.15*** 0.02 0.13*** 0.02Explained 0.10*** 0.02 0.06*** 0.02 0.17*** 0.02 0.16*** 0.02Unexplained 0.02 0.02 0.04 0.03 −0.02 0.02 −0.03** 0.01

Female 1994 Female 2005 Female 1994 Female 2005

Private 10.07 0.03 9.68 0.02 10.99 0.02 9.57 0.02Public 10.39 0.03 10.07 0.02 11.23 0.02 9.89 0.02Difference 0.32*** 0.04 0.39*** 0.03 0.24*** 0.03 0.32*** 0.02Explained 0.15*** 0.02 0.19*** 0.02 0.23*** 0.02 0.24*** 0.02Unexplained 0.17*** 0.03 0.19*** 0.03 0.01 0.02 0.07*** 0.01

SE US

Male 1995 Male 2004 Male 1994 Male 2004

Private 10.07 0.01 10.50 0.01 9.73 0.01 10.31 0.01Public 10.08 0.02 10.49 0.02 10.00 0.01 10.56 0.01Difference 0.01 0.02 −0.01 0.02 0.27*** 0.01 0.25*** 0.01Explained 0.12 0.02 0.22 0.02 0.31*** 0.01 0.29*** 0.01Unexplained −0.11 0.02 −0.23 0.02 −0.05*** 0.01 −0.04*** 0.01

Female 1994 Female 2005 Female 1994 Female 2005

Private 9.63 0.02 10.16 0.02 9.21 0.01 9.86 0.01Public 9.64 0.01 10.13 0.01 9.53 0.01 10.16 0.01Difference 0.02 0.02 −0.03 0.02 0.32*** 0.02 0.30*** 0.01Explained 0.11 0.01 0.24 0.02 0.28*** 0.01 0.32*** 0.01Unexplained −0.10 0.02 −0.27 0.02 0.04*** 0.01 −0.02** 0.01

Note: Using normalized person weight, * p < 0.05, ** p < 0.01, *** p < 0.001.


associated with a change in the covariates, the quantile regression model specifies changes in the conditional quantile’ (Hao and Naiman 2007, 3). By calculating earnings level-specific slope coefficients, quantile regression enables us to achieve a more complete understanding of how the response distribution (in our case, labour income) is affected by predictors, including information about the shape change (Hao and Naiman 2007, 3).

Figures 3.2–3.5 present estimation results from a series of quantile regres-sions. Again, each regression includes the full set of control variables. Specifically, we ran five quantile regressions on each country year sample, for the 10 per cent, 25 per cent, 50 per cent, 75 per cent and 90 per cent quantiles. Whether the coefficient for public employment reached statistical significance is indicated by a grey diamond. The graphs show the resulting point estimates of the public/private sector labour income differentials and the corresponding 95 per cent confidence intervals. The x-axis shows the five quantiles and the y-axis is defined by the earnings differential. Combining the point estimates for public/private sector log labour income differentials gives a function that reveals how the public/private sector labour income gap varies across the earnings distribution (compare the stylized representa-tion in Figure 3.1). In the log-lin specification that we are using, the beta coefficient for the sector dummy measures the constant proportional change

–.2

0.2

.4.6

0 20 40 60 80 100

Quantile

DE Male 1994

–.2

0.2

.4.6

0 20 40 60 80 100

Quantile

DE Male 2004

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

DE Female 1994

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

DE Female 2004

Figure 3.2 Quantile regression results, public/private wage differentials, GermanyNote: Error bars represent the 95 per cent confidence interval, diamonds represent statistically significant public/private wage differentials (p ≤ 0.05), using normalized person weight.


in the dependent variable for a given absolute change in the value of the independent variable (Gujarati 2003, 179). In substantive terms, a one-unit change in the independent variable causes an (e b − 1) × 100% change in the dependent variable.

In Germany (Figure 3.2), the function describing the public/private sector labour income gap across the five quantiles of the labour income distri-bution has a strong negative slope, resulting in rather large public sector labour income premiums at the bottom of the income distribution and large income deductions at the top of the income distribution. With respect to female public employees, this function is shifted upwards, indicating that even employees in the 50 per cent quantile receive a public sector earning premium. In terms of temporal stability, there is no evidence for any sub-stantial changes in the position or slope of these functions in the last decade.

In France (Figure 3.3), the function describing the conditional labour income differentials is slightly less steep. With respect to men in 2005, at the bottom of the labour income distribution the differentials fail to reach statistical significance. At both points in time, however, public employment generates a labour income premium for women at the bottom of the earn-ings distribution, an effect that even extends towards the median in 2005.

Figure 3.3 Quantile regression results, public/private wage differentials, FranceNote: Error bars represent the 95 per cent confidence interval, diamonds represent statistically significant public/private wage differentials (p ≤ 0.05), using normalized person weight.

–.1

0.1

.2

0 20 40 60 80 100Quantile

FR Male 1994

–.1

0.1

.2

0 20 40 60 80 100Quantile

FR Male 2005

–.1

0.1

.2

0 20 40 60 80 100Quantile

FR Female 1994

–.1

0.1

.2

0 20 40 60 80 100Quantile

FR Female 2005


In Sweden (Figure 3.4), the slope of the function describing the condi-tional labour income differentials is close to zero. Moreover, the position of this function is shifted downwards. Hence public employment is associated with a labour income deduction rather than an income premium starting from the 25 per cent percentile for men and from the 50 per cent percentile for women in 1995. In 2005, we find constant negative labour income differentials for both genders. This pattern needs to be interpreted carefully, however, as we needed to impute the dummy for part-time employment.8

In the United States (Figure 3.5), the function describing the conditional labour income differentials shows some remarkable similarities with the German case, at least in 1994, even though the positive as well as the negative effect of public employment is less strong than in Germany. With respect to the two points in time, the negative slope of the function describing the con-ditional labour income differentials for men declined, whereas for women the whole function shifted downwards. In sum, evidence from quantile regression supports the conclusion that in all countries, with the exception of Sweden, the size and direction of the public/private labour income gap depends on the position in the labour income distribution. In Germany, France and the United States, we observe the characteristic negative slope of

Figure 3.4 Quantile regression results, public/private wage differentials, SwedenNote: Error bars represent the 95 per cent confidence interval, diamonds represent statistically significant public/private wage differentials (p ≤ 0.05), using normalized person weight.

–.3

–.2

–.1

0.1

0 20 40 60 80 100Quantile

SE Male 1995

–.3

–.2

–.1

0.1

0 20 40 60 80 100Quantile

SE Male 2005

–.3

–.2

–.1

0.1

0 20 40 60 80 100Quantile

SE Female 1995

–.3

–.2

–.1

0.1

0 20 40 60 80 100Quantile

SE Female 2005


the function describing the conditional earnings differentials. This pattern appears to be particularly pronounced in Germany and the United States.

Juhn-Murphy-Pierce decomposition

Quantile regressions reveal how conditional labour income differentials vary across the labour income distribution, but do not elucidate to what extent the gap is explained by changes in the productivity characteristics of employees. To complement the Oaxaca-Blinder decomposition and the quantile regression analysis, we apply the decomposition technique pro-posed by Juhn et al. (1993), which takes the full earnings distribution into account. The Juhn-Murphy-Pierce method extends the Oaxaca-Blinder approach by decomposing earnings differentials into three parts: the con-tribution of individual characteristics (differences in observable quantities), the contribution of differences in observable prices (resulting from a change in the slope coefficients) and the residual effect or influence from unobserv-able factors (differences in unobservable quantities and prices; Démurger et al. 2012, 149). The joint effect of these unobservable factors is interpreted as the public/private sector labour income gap. In a similar approach to the Oaxaca-Blinder decomposition, we use a pooled model to estimate the refer-ence labour income structure. Figures 3.6–3.9 summarize findings from the

–.2

–.1

0.1

.2

0 20 40 60 80 100Quantile

US Male 1994

–.2

–.1

0.1

.2

0 20 40 60 80 100Quantile

US Male 2004

–.2

–.1

0.1

.2

0 20 40 60 80 100Quantile

US Female 1994

–.2

–.1

0.1

.2

0 20 40 60 80 100Quantile

US Female 2004

Figure 3.5 Quantile regression results, public/private wage differentials, United StatesNote: Error bars represent the 95 per cent confidence interval, diamonds represent statistically significant public/private wage differentials (p ≤ 0.05), using normalized person weight.


Juhn-Murphy-Pierce decomposition. For the substantive interpretation, we focus on the two bold lines representing total differences in labour income and the contribution of differences in unobserved quantities and prices.

Apart from the ten per cent quantile, the total differences in log labour income confirm quantile regression results for Germany (Figure 3.6). Moreover, we find that the distance between the two bold lines is larger for women than for men over the whole labour income distribution. Thus, even though in both cases the total differences in labour income are better explained by productivity characteristics at the bottom end of the labour income distribution, there remains a substantial public/private sector earn-ings gap for women. These findings are rather stable over time, as we do not find any substantial changes in the slope or position of these functions between the two points in time.

A similar pattern emerges for France (Figure 3.7). Again, for both genders we find the characteristic negative slope for total differences in log labour income and a larger public/private sector income gap for women.

A completely different pattern is observed in Sweden (Figure 3.8). First, total differences in log labour income hardly change across the labour income

–.2

0.2

.4.6

.8

0 20 40 60 80 100Quantile

T Q P U

DE Male 1994

–.2

0.2

.4.6

.8

0 20 40 60 80 100Quantile

T Q P U

DE Male 2004

–.2

0.2

.4.6

.8

0 20 40 60 80 100Quantile

T Q P U

DE Female 1994

–.2

0.2

.4.6

.8

0 20 40 60 80 100Quantile

T Q P U

DE Female 2004

Figure 3.6 Juhn-Murphy-Pierce decomposition, public/private wage differentials, GermanyNote: T = total difference (public/private), Q = contribution of differences in observable quantities, P = contribution of differences in observable prices, U = contribution of differences in unobservable quantities and prices, using normalized person weight.


Figure 3.7 Juhn-Murphy-Pierce decomposition, public/private wage differentials, FranceNote: T = total difference (public/private), Q = contribution of differences in observable quantities, P = contribution of differences in observable prices, U = contribution of differences in unobservable quantities and prices, using normalized person weight.

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

FR Male 1994

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

FR Male 2005

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

FR Female 1994

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

FR Female 2005

distribution. We observe slope coefficients close to zero, and the remaining differences are almost fully explained by productivity characteristics. Thus, apart from women at the 10 per cent and 90 per cent quantiles in 2005, there are no indications of a public/private sector income gap in Sweden.

Finally, decomposition results for the United States (Figure 3.9) confirm the findings from quantile regressions. Particularly for men and women in the bottom segments of the labour income distribution, there is a sub-stantial public/private sector income gap. Moving down the income quan-tiles, the total differences in labour income are better explained by individual productivity characteristics. In sum, we find clear indications of an average public sector earnings premium in Germany, France and the United States, while no such effect is observed in Sweden. The differential labour income curve is clearly visible in Germany and the United States, and present – albeit weaker – in France, while the effect is negligible in Sweden. These findings are well in line with the expectations formulated on the basis of the characteri-zation of the public employment regimes and the strength and policy of the trade unions, at least with respect to Germany, France and Sweden, while the results for the United States might need more investigation.


Conclusion

This chapter has focused on the question whether public employment regimes and NPM reforms can be linked to changes in the public/private sector earnings gap. The empirical findings may be summarized in three points. First, apart from Sweden, we find the characteristic shape of the pub-lic/private sector earnings gap in the United States, Germany and to a lesser extent France. In line with Gornick and Jacobs (1998, 694), the strength of the public sector earnings gap is inversely related to the extent of public sector employment. With a larger public sector, the occupational and educa-tional composition of the two workforces becomes more similar and distinct pay policies begin to vanish, which in our case selection applies to Sweden and France where the share of public employment has been higher than in Germany and the United States (Table 3.1).

Second, in none of the four countries do we find strong evidence for sub-stantive changes in the public/private sector earnings gap during the decade between the mid-1990s and the mid-2000s. While in Sweden differences in public and private sector earnings continue to be minimal, for the other countries both the public sector earnings premium at the low end and the

Figure 3.8 Juhn-Murphy-Pierce decomposition, public/private wage differentials, SwedenNote: T = total difference (public/private), Q = contribution of differences in observable quantities, P = contribution of differences in observable prices, U = contribution of differences in unobservable quantities and prices, using normalized person weight.

–.4

–.2

0.2

.4

0 20 40 60 80 100Quantile

T Q P U

SE Male 1995

–.4

–.2

0.2

.4

0 20 40 60 80 100Quantile

T Q P U

SE Male 2005

–.4

–.2

0.2

.4

0 20 40 60 80 100Quantile

T Q P U

SE Female 1995

–.4

–.2

0.2

.4

0 20 40 60 80 100Quantile

T Q P U

SE Female 2005


Figure 3.9 Juhn-Murphy-Pierce decomposition, public/private wage differentials, United StatesNote: T = total difference (public/private), Q = contribution of differences in observable quantities, P = contribution of differences in observable prices, U = contribution of differences in unobservable quantities and prices, using normalized person weight.

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

US Male 1994

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

US Male 2004

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

US Female 1994

–.2

0.2

.4.6

0 20 40 60 80 100Quantile

T Q P U

US Female 2004

earnings deduction for public employees as compared to their private sec-tor counterparts at the high end of the earnings distribution remain almost unchanged. Thus there is no distinct NPM or neo-Weberian reform path observable when it comes to conditional earnings differences during that decade. We therefore conclude that the public employment regime estab-lished during the Golden Age of the TRUDI model continues to play an important role in determining the position and shape of the public/private sector earnings gap in all cases, including the United States.

Third, however, these findings need careful assessment with respect to the complexity of changes over time. Irrespective of the persistence of the public/private earnings gap observed so far, in all four regimes attempts to modernize public pay policies may well be under way, but due to slow personnel turnover they might not yet have resulted in adjustments in the earnings gap. Moreover, the public/private sector earnings gap must be inter-preted against the backdrop of changes in private sector pay policies. At least in Germany, and to a lesser extent in France, an increase in the relative share of low-pay sectors may be observed. If these changes take place in both the public and private sectors, which is the case for social services (Kroos and


Gottschall 2012), the characteristic public/private sector earnings gap might be maintained.

Another finding indicating a need for further research refers to the compet-itive position of the state as an employer. In the low-earnings segment, the state still maintains its role as an attractive employer due to relative employ-ment security and a considerable earnings premium. In the high-earnings segment, by contrast, potential employees are confronted with a trade-off between lower pay and higher employment and pay security. While the state should thus be able to select the best applicants in the low-earnings segment, recruitment of the best candidates for higher positions might be more diffi-cult, as this might involve a specific selectivity on the part of the candidates. Given, however, that public services typically monopolize professional jobs in this labour market segment, which includes medical services, higher edu-cation, regulatory agencies and so on, pay and employment conditions may be of lesser relevance as a factor in the choice of occupation than personal interest, social prestige and, last but perhaps not least, a public service ethos.

Appendix

Table 3A.1 Definition and coding of variables

Variable Definition LIS source

Labour income

Natural log of annual monetary gross labour income (measured in US dollars, inflation-adjusted)

pmil

Public employment

Public, reference category = private, individual/family enterprise, household or self-employed excluded

sector1

Age Age in years ageFemale Gender, reference category = male sexMarried Marital status, reference category = single, widowed,

divorcedmarital

Part-time employment

Employment intensity measured via part-time employment in all jobs (dummy), reference category = full-time, imputed in Sweden 2005 (deviation from the linear prediction lies within the 10% percentile)

ptime

Weeks Annual weeks worked, any information weeksEducation Highest completed education level (3-category

recode), reference category = 2nd categoryeduc

Occupation Occupation (3-category, 1 = managers and professionals [isco 1 & 2], 2 = other skilled workers [isco 3–8, 10], 3 = labourers/elementary [isco 9], reference category = 2)

occa1

Activity Status Employed (dummy) empPerson Weight Person weight (normalized) pwgt

Note: country samples de04p, de94p, fr05p, fr94p, se05p, se95p, us04p, us94p.

64 The Public/Private Sector Earnings GapTa

ble

3A.2

D

escr

ipti

ve s

tati

stic

s

Var

iab

leN

Mea

nSD

Min

.M

ax.

NM

ean

SDM

in.

Max

.

Ger

man

y 19

94G

erm

any

2004

Labo

ur

inco

me

7,41

810

.46

0.84

4.75

13.5

910

,235

10.2

30.

975.

2313

.31

Publ

ic e

mp

loym

ent

7,57

00.

260.

440

110

,356

0.27

0.44

01

Age

7,57

038

.39

11.5

717

8610

,356

42.4

511

.46

1784

Fem

ale

7,57

00.

430.

490

110

,356

0.47

0.50

01

Mar

ried

7,57

00.

660.

470

110

,356

0.63

0.48

01

Part

-tim

e em

plo

ymen

t7,

570

0.16

0.36

01

10,3

560.

230.

420

1W

eeks

7,47

147

.83

10.0

02

5210

,234

49.2

18.

392

52Ed

uca

tion

low

7,57

00.

210.

410

110

,356

0.12

0.33

01

Edu

cati

on m

ediu

m7,

570

0.54

0.50

01

10,3

560.

530.

500

1Ed

uca

tion

hig

h7,

570

0.25

0.44

01

10,3

560.

350.

480

1O

ccu

pat

ion

man

ager

7,57

00.

160.

370

110

,356

0.26

0.44

01

Occ

up

atio

n s

kill

ed w

orke

r/em

plo

yee

7,57

00.

750.

430

110

,356

0.67

0.47

01

Occ

upa

tion

ele

men

tary

wor

ker/

empl

oyee

7,57

00.

080.

280

110

,356

0.06

0.24

01

Fran

ce 1

994

Fran

ce 2

005

Labo

ur

inco

me

9,13

511

.27

0.85

0.00

15.0

09,

157

9.89

0.72

4.11

12.8

4Pu

blic

em

plo

ymen

t9,

135

0.30

0.46

01

9,15

70.

290.

450

1A

ge9,

135

38.4

99.

9917

809,

157

39.7

110

.75

1677

Fem

ale

9,13

50.

460.

500

19,

157

0.50

0.50

01

Mar

ried

9,13

50.

640.

480

19,

157

0.56

0.50

01

Part

-tim

e em

plo

ymen

t9,

135

0.16

0.37

01

9,15

70.

170.

380

1W

eeks

9,12

349

.26

8.81

452

9,14

549

.58

8.33

452

Edu

cati

on l

ow9,

135

0.46

0.50

01

9,15

70.

220.

410

1Ed

uca

tion

med

ium

9,13

50.

320.

460

19,

157

0.46

0.50

01

Edu

cati

on h

igh

9,13

50.

220.

410

19,

157

0.32

0.47

01

Occ

up

atio

n m

anag

er9,

135

0.22

0.41

01

9,15

70.

250.

430

1O

ccu

pat

ion

ski

lled

wor

ker/

emp

loye

e9,

135

0.69

0.46

01

9,15

70.

680.

470

1O

ccu

pati

on e

lem

enta

ry w

orke

r/em

ploy

ee9,

135

0.09

0.29

01

9,15

70.

080.

270

1


Swed

en 1

995

Swed

en 2

005

Labo

ur

inco

me

11,2

969.

880.

702.

8512

.91

10,0

1810

.33

0.65

3.06

13.4

8Pu

blic

em

plo

ymen

t11

,334

0.37

0.48

01

10,0

580.

370.

480

1A

ge11

,334

41.2

211

.26

1774

10,0

5842

.86

12.0

018

74Fe

mal

e11

,334

0.50

0.50

01

10,0

580.

500.

500

1M

arri

ed11

,334

0.84

0.36

01

10,0

580.

510.

500

1Pa

rt-t

ime

emp

loym

ent

11,3

340.

260.

440

110

,058

0.17

0.38

01

Wee

ks11

,334

49.8

77.

524

5210

,021

50.4

65.

724

52Ed

uca

tion

low

11,3

340.

190.

390

110

,058

0.12

0.33

01

Edu

cati

on m

ediu

m11

,334

0.50

0.50

01

10,0

580.

560.

500

1Ed

uca

tion

hig

h11

,334

0.31

0.46

01

10,0

580.

320.

470

1O

ccu

pat

ion

man

ager

11,3

340.

300.

460

110

,058

0.43

0.49

01

Occ

up

atio

n s

kill

ed w

orke

r/em

plo

yee

11,3

340.

650.

480

110

,058

0.34

0.47

01

Occ

upa

tion

ele

men

tary

wor

ker/

empl

oyee

11,3

340.

050.

220

110

,058

0.23

0.42

01

USA

199

4U

SA 2

004

Labo

ur

inco

me

59,9

109.

521.

051.

3811

.97

76,4

8910

.13

1.03

013

.53

Publ

ic e

mp

loym

ent

59,9

100.

180.

380

178

,504

0.19

0.39

01

Age

59,9

1038

.28

12.4

915

9078

,504

39.3

612

.86

1585

Fem

ale

59,9

100.

490.

500

178

,504

0.48

0.50

01

Mar

ried

59,9

100.

590.

490

178

,504

0.59

0.49

01

Part

-tim

e em

plo

ymen

t59

,910

0.17

0.38

01

78,5

040.

170.

380

1W

eeks

59,9

1046

.84

10.8

21

5276

,514

48.4

89.

371

52Ed

uca

tion

low

59,9

100.

130.

340

178

,504

0.13

0.34

01

Edu

cati

on m

ediu

m59

,910

0.53

0.50

01

78,5

040.

500.

500

1Ed

uca

tion

hig

h59

,910

0.34

0.47

01

78,5

040.

370.

480

1O

ccu

pat

ion

man

ager

59,9

100.

290.

450

178

,504

0.28

0.45

01

Occ

up

atio

n s

kill

ed w

orke

r/em

plo

yee

59,9

100.

620.

490

178

,504

0.64

0.48

01

Occ

upa

tion

ele

men

tary

wor

ker/

empl

oyee

59,9

100.

100.

290

178

,504

0.08

0.27

01


Notes

1 In legal terms, two types of public employment contracts may be distinguished: civil servants (Beamte) with life-time work contracts and separate social security programmes, and public servants (Tarifangestellte) with work contracts according to private law.

2 Alternative income studies such as the European Union Statistics on Income and Living Conditions (EU SILC) and the European Community Household Panel sur-vey (ECHP) were not considered, since the ECHP is available only from 1994 to 2001 and the follow-up study, the EU SILC, does not include an item measuring public employment.

3 Further issues related to the endogeneity of sector choice will not be considered in this chapter. In the light of these limitations, caution must be exercised in inter-preting the estimation results (Melly 2005, 507).

4 See Tepe and Kroos (2010) for a comparative analysis of the public/private sector wage gap for civil servants and public servants.

5 The definition and coding of variables is summarized in Table 3.A1, descriptive statistics for all eight samples are summarized in Table 3.A2 in the Appendix.

6 The decomposition results are generated using the oaxaca (Jann 2008), qreg and jmpierce (Jann 2006) commands in Stata.

7 The full estimation result showing the effect of the control variables is available upon request.

8 The LIS does not provide data on part-time employment in Sweden.

67

4The Evolving Post-national Regulation of Financial ReportingJörg R. Werner and Jochen Zimmermann

Many believe that financial reporting is merely a technical issue, discussed in professional circles and being of only minor relevance for the society or economy as a whole. However, accounting and financial reporting are crucial for the functioning of businesses and markets. This makes financial accounting an important ingredient in creating overall welfare, and it is no surprise that nation states have often intervened in accounting regulation. Regulation has varied across countries. Continental Europe has traditionally relied more on extensive legal and hierarchical regulation than have Anglo-Saxon countries, which featured more collaborative interventions, that is, a type of regulation in which private actors – most prominently, private standard setters and other professional organizations – have been embedded in the regulatory frameworks.

These different solutions have one common feature: They were all confined to the nation states in which they operated. However, in an increasingly globalized world, such national solutions have come under scrutiny. In global capital markets, a ‘common financial language’ in the form of a single set of global accounting standards might overcome problems of regulatory segmentation: It better allows investors to compare financial statements from companies domiciled in different jurisdictions, thereby reducing their investment risk. It might also decrease reporting costs within multina-tional firms and enable auditors to realize economies of scale (Tweedie and Seidenstein 2005).

Such a new framework of accounting regulation has emerged since the late 1990s. The most distinctive feature of the new architecture is the presence of a transnational standard setter, the International Accounting Standards Board (IASB) which produces financial reporting rules with global outreach, the International Financial Reporting Standards (IFRS), previously called International Accounting Standards (IAS). One of the first regulators to officially acknowledge IAS/IFRS was the Tokyo Stock Exchange which in 1979 allowed foreign companies to file annual financial statements pre-pared under this framework (Zeff 2012). Nowadays, more than 120 countries

68 Post-national Regulation of Financial Reporting

around the world permit or require their domestic companies to apply these rules. The rise of IFRS gaining momentum in the 2000s is a remarkable devel-opment since standard setter officials in 1987 still complained about a lack of any greater impact of IFRS in the developed world (Zeff 2012). More and more countries today adopting IFRS marks a vast formal convergence of regulation, both in terms of applicable accounting rules and of accounting governance.

However, traditional national accounting rules still persist in some coun-tries, mostly in continental Europe, where they particularly remain applicable to financial statements of private (that is, unlisted) firms and unconsolidated accounts. This gives rise to a hybrid solution in today’s accounting regula-tion: While privately set IFRS are so far mainly applicable to financial reports issued by listed firms in their consolidated financial statements, unlisted firms are often still required to comply with local accounting standards that originated under more traditional standard setting procedures. Overall, two important questions have remained unanswered with regard to this setting. First, what are the underlying causes of the observed changes? And second, are the observable changes an outcome – and thus indicative – of broader transformations of the state? This chapter deals with both questions.

The remainder of the chapter is organized as follows. We first summarize the evidence on the changes in accounting regulation. We then develop a general framework that helps to explain why some elements of accounting regulation are getting more similar while others remain different. The final two sections of the chapter present more detailed evidence and summarize our main findings.

Accounting between global convergence and national preference: The evidence

In recent years, a new architecture of accounting regulation has evolved. Most notably, an international, private (that is, transnational) standard set-ter has emerged that aims at developing financial reporting standards with global outreach. The standard setter’s efforts have been backed by many national governments that prescribed that the transnationally set standards be adopted at least by subgroups of firms, particularly those listed on pub-lic markets. Reporting demands for these firms are supposedly better met by globally uniform, high-quality standards developed by an international professional body (Hammermeister and Zimmermann 2010). The rapid adoption of international standards has led to an increasing formal conver-gence of accounting standards across the world and came about in a rather revolutionary manner, as the popular term ‘global IFRS revolution’ suggests (Benzacar 2008; Chua and Taylor 2008).

For listed firms, there are already some doubts about whether formal convergence of the rules goes hand in hand with a factual convergence of

Jörg R. Werner and Jochen Zimmermann 69

accounting practices at the firm level (Ball 2006). The revolutionary charac-ter of the changes has so far also left reporting firms without implementation guidance (Schipper 2005), and enforcement mechanisms are not yet globally consistent (Ball 2006; Zimmermann et al. 2008). Moreover, the convergence process remained restricted in several respects: In most countries, private, unlisted companies still have to report according to national account-ing rules (Werner and Zimmermann 2007). Even more strikingly, in many countries unconsolidated ‘parent-only’ accounts still have to be prepared according to national rules, even for listed firms (Goncharov et al. 2009).

This hybridization has introduced inconsistencies into the national accounting systems due to the fact that, in many cases, the same entities have to prepare two different sets of accounts – that is, consolidated group accounts and unconsolidated parent-only accounts – following two different sets of rules. IFRS are used for one, national rules for the other. The reason for the current hybrid solution is that both accounts serve different purposes. Consolidated accounts inform outsiders about the financial position of the economic entity in which they are invested. Where nation states require additional (unconsolidated) accounts according to national rules, they have tied legal consequences to them, most notably dividend and tax payments. Overall, unconsolidated accounts are embedded more strongly in the national socio-economic systems and thus are more resistant to harmoniza-tion. While the financial reporting rules for listed companies have largely been harmonized, national solutions prevail for smaller firms and accounts that radiate into the national socio-economic system.

Zimmermann et al. (2010) trace regulatory changes in six major OECD countries: Canada, Germany, France, Japan, the United Kingdom and the United States – with the United Kingdom, the United States and Canada representing ‘outsider’ or ‘common law’ legal systems and Germany, Japan and France following what is called an ‘insider’ or ‘code law’ system. Indeed, the traditional regulatory settings in the sample countries differed: Germany, France and Japan are part of a country group that has a long-standing tradition of state-dominated accounting regulation. In the 1970s, regula-tion in these countries was generally characterized by a strong legal back-ing, as accounting rules were mainly set by parliaments in the form of laws. The incorporation of private actors in standard setting was of minor rel-evance. Professional bodies regulated their members’ behaviour but held no further competence in accounting regulation. These countries also featured a strong interrelation between financial reporting and tax accounting, and their predominant use of accounting was payout-oriented (Werner and Zimmermann 2009).

In contrast, Canada, the United Kingdom and the United States exemplify countries where accounting regulation originated in the private sector and remained dominated by professional self-regulation. Legal backing was tra-ditionally low, as rules were privately set. One of the likely reasons is that


the legal system in countries such as the United Kingdom, Canada or the United States never assigned determination of corporate payouts – such as calculating distributable income or corporate taxes – to the financial report-ing process (Goncharov et al. 2009).

The traditional differences in accounting regulation have been subject to change. Over the last decades, extreme governance models have increas-ingly diminished. Accounting systems with strong reliance on the state have incorporated private actors to enhance market efficiency, while lib-eral accounting systems have strengthened the legal backing of accounting rules to provide them with legitimacy (Luthardt and Zimmermann 2009). These developments seem to be largely influenced by harmonized require-ments for accounting regulations through globalized financial markets (Hammermeister and Zimmermann 2010). International competition for funds made the provision of capital-market-oriented financial statements an increasingly important accounting function, and today it is featured in the six countries’ accounting systems. The harmonization of regulatory needs also initiated the search for a global set of comparable accounting stand-ards. The ongoing internationalization of accounting standards had major impacts on most accounting systems, as international rules were adopted or mimicked at the national level.

But even if there is strong evidence for a trend towards convergence of accounting systems, a closer look also reveals that there are different patterns and paces of change. Convergence with regard to the predominant uses of accounting is only the case for consolidated accounts. Single accounts in Germany, France and Japan remain largely unaffected by the harmoniza-tion process. Neither their function in determining corporate payouts nor the accounting regulations addressing single accounts have changed. Rapid change took place in some areas, while others saw only incremental reform. Information-oriented accounting is provided for the economic entity in con-solidated accounts, and single accounts still diverge among countries of dif-ferent regulatory origins. For these countries (Germany, France and Japan), a stable level of legal backing points to ongoing differences in the relation of accounting to tax and company laws.

Different paths and paces of change have not yet been addressed and explained in the literature. Comparative accounting research – the strand of literature to which we contribute – has largely focused on static compari-sons, that is, on comparing accounting systems (and their embeddedness) across countries at a given point in time (Werner and Zimmermann 2009). Differences in legal and financial systems and also in culture have been iden-tified as explanatory factors for differences in accounting systems and their respective modes of governance (Werner 2008).

However, there are several research gaps in this strand of literature. First, the role of the state seems to have been neglected in previous analyses. Second, static comparisons do not account for changes over time. The main


explanation for change in static models would be that the variables causing differences in accounting systems at a given point in time – for example, legal and financial systems – change over time. Even though there is some evidence that legal and financial systems do take different shapes over time, the consequences for financial reporting have not explicitly been addressed in comparative accounting research. This might be due to the fact that these changes are incremental rather than revolutionary. Moreover, third, com-parative accounting research has not addressed the question of why these incremental changes take place. To the degree that the institutional struc-tures change, these alterations seem to be endogenous to more fundamental drivers (or triggers) of change, which have not been identified in previous research. The latter could be related to a fundamental change of nation states that, fourth, has not been addressed in comparative accounting research.

Explaining the change of accounting systems: A framework for analysis

The evidence for different paths and paces of change in accounting regula-tion begs the question of why the process took place – and why so far no total convergence has been achieved. In the following discussion, we argue that the observed changes may be understood as a process of self-transformation triggered by decisions of individual or collective actors. The process takes place in two steps. First, economic and political agents react to exogenous ‘shocks’ such as globalization, which requires existing national accounting systems to be changed. These alterations should generally lead to worldwide convergence of accounting regulation, due to mimicking, normative pres-sure or coercion. Second, in the changeover, existing national institutions matter as they constrain the agents’ scope in altering system elements. As a consequence, the exogenous shocks may lead to different paths and paces of change. This explanatory approach thus calls for inquiring into the role of two distinct types of explanatory variables.

First, we consider the influence of variables that trigger decisions of agents with regard to general systemic change (triggering events or exogenous shocks). Here we particularly shed light on the role of globalization, emerg-ing professional networks and corporate crises. Unconstrained by institu-tional arrangements, these factors should lead to coercive, normative and mimetic isomorphism of accounting regulation.

However, the existing institutional frameworks within countries do limit the agents’ decisions and create path dependencies. Second, we therefore analyse the role of intervening variables. We particularly shed light on the role of national socio-economic systems, in particular the legal and finan-cial systems and the type of welfare state, which together are likely to be relatively stable over time and to shape processes of change at the country level.


Even though it does not constitute economic modelling itself, our explan-atory approach is based on arguments put forward in evolutionary econom-ics, which seems a promising starting point for our analysis. Evolutionary economics is a general approach that helps to explain processes of change by looking at the individual behaviour of agents with bounded rationality. The application of evolutionary theory to economic phenomena has been the subject of a lot of research effort in recent years and may be regarded as its own school of thought in analysing economic problems (Witt 2008). It is one of the few research paradigms that are not static in nature and thus can particularly be used when analysing (or rather, explaining) phenomena of economic change or other dynamic processes. While it is often supposed that evolutionary theory is, more or less, an adaptation of the Darwinian theory of natural selection, this is not quite true for evolutionary economics. The main reason is that natural selection does not necessarily extend to ‘selection’ pro-cesses in social systems, due to the intelligence of the economic agents and the social interactions between them. As Witt (2002, 10) argues, evolution-ary economics rather understands evolution as a self-transformation process of a particular system. Even without a generally agreed-upon definition of evolutionary economics, it is usually built on the following three premises:

• Evolution of economic systems can be understood as a process of self-transformation triggered from within by learning and innovations of economic agents who are characterized by bounded rationality.

• Preferences, technologies and institutions are not treated as exogenous but become an explicit object of analysis.

• Evolutionary processes are not erratic but follow regular patterns on which explanatory hypotheses may be based.

In the following three subsections, we briefly outline how the three premises are applied to explaining the emergence of a new constellation of account-ing regulation.

Evolution of economic systems as a process of self-transformation

Systemic change is triggered from within by learning and innovations of economic agents who are characterized by bounded rationality. Our explan-atory model assumes that regulatory and other economic actors induce change when triggering events occur. Due to the fact that individual and collective actors are embedded in the systems that are subject to change, systemic transformation is always self-transformation (Witt 2008). We thus follow an actor-centred view when explaining processes of change, referring to DiMaggio and Powell (1983), who describe the behaviour of economic agents by distinguishing three different ways of institutional learning called mimetic, normative and coercive (Csigó 2006). In the following paragraphs, we outline how these types of institutional learning by economic agents might affect accounting regulation (Zimmermann and Werner 2013):


Coercive isomorphism: This type of isomorphism mainly stems from pressure from other organizations and cultural expectations. We argue that coercive isomorphism in accounting regulation mainly originates from reporting demands in globalized capital markets. Due to ever larger projects, firms need to compete for funds internationally. Self-financing from retained earnings or tapping into the national market is no longer sufficient. Competing for international funds makes it necessary to respond to the demand of financial investors for comparable high-quality informa-tion. Financial reports that are hard to understand deter investors; at best, they require a higher risk premium. High risk premiums either devalue the firm or crowd it out of the capital markets as competing projects from other firms gain preference. Globalized financial markets thus introduce pressure for financial accounts to look alike.

Mimetic isomorphism: In general, mimetic isomorphism refers to the reac-tion of organizations facing environmental uncertainty or doubts about organizational technologies, which often leads them to model themselves on other organizations that are considered successful at that time. We argue that cases of fraud, accounting scandals and business crises particularly lead to a mimicking reaction by accounting regulators (Chua and Taylor 2008). The reason is that such events raise public doubt about the suitability of national regulation. Regulators react to public concerns by creating new regulation. New regulation then is likely to be a transplant of regulation found in other countries which at that time do not suffer from scandals or fraud. There are primarily two paths by which crises can lead to mimetic isomorphism. First, a revision of the system starts in one country because accounting scandals occur. It might then take reforms which are modelled on regulation in other countries. Second, the appearance of accounting scandals in another country might alert the regulator due to similarities of the affected system. In both cases, the ambiguity about the stability of particular elements of the system or the stability of the system as a whole is the driving force for the search for different solutions. In terms of legitimacy, the regulator is threatened by a loss of confidence in its ability ‘to maintain or establish effective normative structures in the extent required’ (Habermas 1973, 47) after such cases attract public attention. By announcing and implementing reforms, the regulator focuses the public’s attention on administrative issues, preventing the insti-tution itself from coming under scrutiny (Sikka and Willmott 1995). Not knowing which alterations are feasible, the regulators start looking for sets of apparently better-working systems in other jurisdictions, hoping to adapt necessary reforms to their own arrangements. This leads to the adoption of seemingly superior regulations from other systems.

Normative isomorphism: Finally, normative pressures are also drivers for the isomorphic change of organizations. Such pressures are supposed to originate mainly from professions and networks that influence the agents’ behaviour. Thus the educational background and the vocational training of


agents belonging to a particular profession may contribute to the emergence of normative isomorphism. The internationalization of service markets gives rise to economies of scale for accounting firms: Their services can be offered in markets other than their domestic ones if they meet their customers’ expectations. Accounting firms therefore have an interest in making their offerings more homogeneous and also in homogenizing the expectations and interests of their clients. This is first done by building networks in which ideas are exchanged, but even more powerfully when these networks can shape the demands of customers, for instance, by interfering with regulation.

Changes induced by mimetic, normative and coercive learning of agents are in line with the assumption of bounded rationality, as the change of structures does not necessarily lead to (global) efficiency. The triggering events for change simply lead to the perception that the regulatory solu-tions in place are outdated and no longer appropriate to cope with new challenges. Economic agents will thus respond to the triggering events by altering accounting practices and regulation – but without knowing what the best solution (the global optimum) would look like. Bounded rationality therefore fosters system changes through different patterns of institutional learning.

Institutions as explicit objects of analysis

A country’s institutions shape the behaviour of economic agents. Within each country, several ‘layers’ of institutions exist. North (1991b, 3) defines institutions as ‘the rules of the game in a society or, more formally, [. . .] the humanly devised constraints that shape human interactions’. In this respect, the institutions forming socio-economic systems are the most fundamen-tal and relatively stable rules of the game to which we restrict our analysis. Institutions develop to solve predominant coordination problems within economic systems. From an institutional perspective, accounting itself may be regarded as a complementary institution that co-evolves with the more general or underlying institutional structure.

We shed particular light on the roles of legal and financial systems in place, but also on the welfare state type, which we regard as a missing link in comparative accounting research (Oehr and Zimmermann 2010). Regulatory and economic actors have to account for these ‘top’ institutional structures as they directly influence their decision-making: They affect contracting and other agency costs and also shape voter demands with regard to the political system and the decisions of regulatory actors.

The paths and paces of accounting change might first be impacted by the legal systems in place: As indicated by findings in the law and finance literature (see, for instance, La Porta et al. 1997), legal systems and the related degree of investor protection seem to explain, to a large extent, differences in accounting regulation among countries (Bushman et al. 2004). Legal systems may differ not only in the way equity investors are


protected, but also with regard to the way and extent the accounting system is used to protect stakeholders. On the one hand, the legal system may grant participation and monitoring rights (Siems 2005). In this case, the rules are interventionist and form standardized contracts between management and owners. The focus of governance is on long-term orientation, and the state has to align accounting with standardized contracts. On the other hand, the legal system may emphasize self-protection by information. In this case, less state intervention is necessary.

The paths and paces of accounting change might, secondly, be influenced by the financial systems in place. Financial systems refer to financing prefer-ences and institutions in developed capitalist economies. Hackethal et al. (2006) define financial systems as comprised ‘both of supply and demand, which is determined by the use that nonfinancial or real sector units make of financial services offered by the financial sector’. Typical features of finan-cial systems thus are country-specific financing preferences, the size and depth of capital markets, the proportions of public and private firms and the existence of an active market for corporate control.

In outsider economies, equity capital is relatively more important than debt capital (Wüstemann 2003), and debt raised on markets is more important than credit raised through banks. Outsider systems show a dispersed owner-ship or holdership in contrast to the family-dominated and bank-financed entities in insider economies. As a result, the information asymmetries of shareholders in outsider economies are greater. Shares in insider econo-mies are often held by well-informed block holders such as families, other companies or the state. The analogue is true for debt. Hence nation states as well as the involved private actors have different interests concerning (the regulation of) financial reporting to maximize overall welfare. In outsider systems, the demand for investor protection is higher, and consequently the basic objective of accounting is to provide useful information for making financial decisions. In contrast, due to the dominant role of the banks, the basic objective of accounting in insider economies is to protect creditors.

Finally, the paths and paces of accounting change might also be driven by the type of welfare state in place: Several studies found evidence that culture has an impact on the shape of accounting systems and practices. However, there are serious concerns against culture as a moderating variable (Baskerville 2003). We thus propose not to consider culture – as is typical in comparative accounting research – but to take a more societal view by look-ing at the welfare state type. We posit that differences in the welfare state type have shaped differences of accounting systems and thus might also affect the ways in which they are altered. Societal motives and value judgements play a substantial role in determining accounting systems. We differentiate between two types of welfare states: residual versus institutional. Societal attitudes expressed in both welfare state models are likely to reflect a coun-try’s prevalent aims and goals for accounting. They, in turn, determine how


the societally important sets of company accounts are regulated: Residual welfare states emphasize the allocative function and leave the regulation to private bodies, while institutional welfare states emphasize the distributive nature of accounting and allocate the regulation to the state. Convergence occurs only in the area that is irrelevant for the regulatory impetus of the welfare state, that is, group accounts, which do not serve a legally binding function.

Explanatory hypotheses

The change of accounting systems is not erratic but may be explained by causal chains. In a world free of institutions and transaction costs, there should be no differences between national accounting systems. In this case, changes of the accounting system should be explained solely by reactions to exogenous developments. But in reality institutions matter, and institutions are not similar across countries. As existing institutions shape patterns of change, history matters. This induces path dependencies that explain why national peculiarities might persist even though economic systems should increasingly converge as economic agents learn. In the literature, several causes for path dependencies have been identified. These include switching costs, the existence of local or multiple equilibriums, rent-seeking of agents as well as the complementarity and consistency of properties of economic or societal systems (Roe 1996; Schmidt and Spindler 2002).

The outlined framework allows the formulation of several hypotheses. Based on the theory of institutional learning, our first hypothesis is that the occurrence of generic driving forces such as globalization, crises and ideologies should contribute to a quick convergence of accounting systems as economic actors try to adapt to the new, global challenges. This hypoth-esis helps to explain why some elements of accounting regulation converged rather quickly. However, we also have to account for the fact that other ele-ments in accounting regulation did not. Thus our second hypothesis is that the driving forces are moderated by country-specific institutional frame-works that still differ across countries. These frameworks have an impact on the decisions of economic actors with regard to systemic change, as the institutional structures shape the regulatory demands of actors within the system. The institutional frameworks are also subject to change, but unlike accounting systems they change incrementally, yet in a way that points to a more fundamental change of socio-economic systems, explained by the emergence of a new architecture of the state involving transnational stand-ard setters, which is our third hypothesis.

Empirical evidence

We assess the explanatory power of our model based on the observable processes of change in six OECD countries: Germany, France and the United


Kingdom (as EU member states), and the United States, Canada and Japan (as non-EU member states). These countries were chosen because they traditionally displayed different business (and legal) systems and have been affected differently by European harmonization efforts. While half of the sample countries (the United Kingdom, the United States and Canada) feature an outsider or common law system, the other half (Germany, Japan and France) follows what is called an insider or code law system (La Porta et al. 1997; Hall and Soskice 2001). This distinction refers to the typical patterns of coordination within national business systems. Accordingly, the countries traditionally displayed diverging goals, functions and institutional designs for financial reporting. While the United Kingdom, the United States and Canada have a long-standing tradition of self-regulation by the accounting profession, Germany, France and Japan rely on a more legalistic approach. A more detailed description of these (groups of) countries and their characteristics as well as evidence for harmonization may be obtained from Zimmermann et al. (2010).

First hypothesis: Global convergence due to triggering events

According to our first hypothesis, the occurrence of generic driving forces such as globalization, crises and ideologies should contribute to a quick convergence of accounting systems, as economic actors will try to adapt to the new global challenges. This hypothesis helps explain why some ele-ments of accounting regulation quickly converged. In particular, we look at the following three driving forces and assess whether they contribute to the emergence of the convergence process.

Globalization is often supposed to have altered the shape of global markets, thereby curtailing the scope of the nation state for interventions (Posner and Veron 2010). The analysis of the transformations of our six sample countries in primary and secondary equity and bond markets reveals that globaliza-tion indeed took place. An analysis of the turnover of foreign shares on the major stock exchanges reveals a growing integration of markets (Abée 2010). Within a decade, their share increased eightfold in Germany and fivefold in France. In the United States, the NYSE’s turnover ratio of foreign shares increased from about five per cent in 1990 to about nine per cent in 2007. Companies only took advantage of foreign capital markets. Within 20 years, the issuances on foreign markets more than quadrupled. Companies now also compete for funds in global capital markets. Competition increased the demand for comparable, high-quality, investor-oriented accounting standards.

These desirable attributes are mostly associated with accounting standards in outsider economies. Hence there was pressure on regulators in insider sys-tems to adopt the regulatory standards of outsider regimes. Listed companies, as competitors for funds, request these standards mainly for two reasons: to reduce their costs of capital and to reduce transaction costs (Jayaraman et al. 1993;


Hail and Leuz 2006). Moreover, large stock exchanges began to require compa-nies to prepare financial reports on an international basis, but there were also many ‘voluntary’ adopters of international standards.

In conclusion, companies modelled their accounting systems on those of other companies that were successful in raising capital. We argue that this may be regarded as a form of coercive isomorphism inducing a process of accounting harmonization. In this process, the role of the state diminished as national (public) regulators increasingly failed to provide necessary resources and technical expertise for creating accounting standards appropriate to meet global reporting demands. Thus globalization may be regarded as an important triggering event of global convergence in accounting regulation. Overall, globalization seems to have induced market forces that strongly pro-moted the harmonization of accounting systems: We find that the sample countries have experienced different waves of globalization since the begin-ning of the 1970s and that there is indeed a concurrence of globalization and accounting harmonization. Financial globalization thus may be regarded as an important driver for the convergence of accounting systems.

Crises might be a second important driver of convergence in accounting regulation (Zimmermann and Werner 2013). Notwithstanding the type of crisis, they make visible that the systems in place have deficits. Politicians and regulators are to some extent held responsible for maintaining and assuring the workability of these systems. But even when not being directly responsible, they might have incentives to react to crises to demonstrate regulatory capabilities and to meet the demand for regulation. Particularly in a severe crisis, political actors are thus likely to respond by supplying new regulations due to the need to react to demands for amendments.

In our sample countries, there is strong evidence that regulators directly reacted to corporate crises, irrespective of their origin. Of course, there is stronger evidence that regulators respond to domestic crises, but there is also evidence that they react to crises abroad, particularly when they occur in culturally close countries and when there seems to be a high likelihood that similar events may also occur ‘at home’. Mimicking regulation found in other countries or introducing regulatory innovations proposed by inter-national organizations may be regarded as drivers for the international con-vergence of regulatory regimes and isomorphic change. There are indeed several cases in which regulators mimicked regulation from other countries. Imitation of Sarbanes-Oxley is the most pertinent example in this area. Such examples are generally in line with our argument that crises make mimetic isomorphism likely and, in the end, impose (further) convergence of regula-tory patterns across nation states.

But there are sometimes also conditions under which mimicking in cri-sis situations is hardly possible: An example is the US reaction to events at Enron, Worldcom and other companies (Healy and Palepu 2003). Due to the fact that US regulation was perceived to give rise to the highest degree


of investor protection even before the crisis, regulatory learning from other countries was rather unlikely. Nevertheless the debate on whether princi-ples-based accounting standards outperform the rules-based standards might be interpreted as weak evidence for learning attempts. However, the answer, then, was what we called a forced innovation.

The same is true for the subprime and financial crises that started in 2008. The emergence of these related crises may be regarded as an outcome of increasing globalization. The main reason is that increasing globalization links formerly autonomous financial systems and that crises in some nation states therefore become crises of all (or the global) financial system(s). The problem with international crises such as the recent banking and financial crisis is that regulatory learning is almost impossible. Because of the global nature of this problem, there are simply no national regulatory solutions that could easily be applied (mimicked) to crises of a global scale that have their origin in a lack of regulation at that level. In this respect, the difficulties in finding a regulatory answer to such crises underline our initial argument that the most likely reaction of regulatory actors is mimicking – and that regulators seem pretty perplexed if mimicking is not possible.

Finally, we inquire into the role of networks in accounting harmoniza-tion (Oehr 2012). Normative isomorphism mainly emerges through simi-lar values and similar educational backgrounds of professionals working as accountants, auditors or standard setters. Similarity in values and educational backgrounds may be explained by several factors: for example, by globally uniform approaches towards accounting education taught in universities, by a uniqueness in vocational training, by global similarities in ‘professional spirit’ ethics and by parallel gatekeeping mechanisms around the world that regulate entry into the profession. The similar background per se is a driver for the emergence of normative isomorphism; the latter, however, is rein-forced by influential networks of professionals who articulate professional opinions. Networks amplify their use through learning effects, economies of scale or adaptive expectations (Katz and Shapiro 1985).

We particularly find three networks playing a role. The first is the global ‘Big Four’ network of auditing firms spanned across national member firms (Lenz and James 2007). For several reasons, normative isomorphism ema-nates from this network. Within countries, professional auditing bodies are often administrated by the (former) Big Four practitioners. As these national bodies have an important gatekeeping function, the latter might be influenced by the Big Four auditors. Moreover, the Big Four audit firms usually perform audit services for the bulk of large and powerful multina-tional enterprises and thus contribute to shaping their accounting practices. The Big Four audit practices as well as reporting practices of multinational enterprises are benchmarks for smaller (national) audit firms and companies, respectively, again pointing to normative isomorphism emanating from the Big Four auditors. Additionally, the Big Four increasingly act globally. For


instance, there have been mergers between previously nationally organized firms, and these legal developments are themselves only a reflection of previ-ously harmonized practice between the national partnerships that operated under a ‘brand umbrella’. Uniform approaches to financial reporting allow such companies to realize economies of scale, inducing normative pressure on national partnerships (and also their clients). Finally, due to their influ-ence, the Big Four represent a big lobbying group demanding influence on international standard setting for accounting (Hopwood 1994).

The second type of networks that play a role are those of standard setting bodies: Besides the IASB, national standard setting bodies play an important role here, first and foremost the Financial Accounting Standards Board (FASB), the US standard setter. In 2002, the IASB and the FASB agreed to develop compatible accounting standards. This was reaffirmed in 2005. Moreover, the IASB closely cooperates with other national standard setters which are them-selves part of the standard setting process by participating in international advisory committees and working groups. Obviously, cooperation among standard setters also gives rise to convergence in accounting regulation.

The third type of networks we regard are those between the Big Four audit firms and standard setters. These networks are often rather informal but might influence national accounting regimes in two ways. On the one hand, the Big Four directly influence the standard setting process, as a lot of board members and officers of the private standard setters are (former) leading managers of accountancy firms (Martinez-Diaz 2005). Additionally, the Big Four are the most prominent group submitting comment letters on discussion papers and drafts (Perry and Nöelke 2005). Obviously, the differ-ent types of networks discussed here have a common feature: They foster the convergence of accounting regulation due to the respective incentives of the participating individual and collective actors, that is, they contribute per se to the convergence of accounting standards and regulation.

Second hypothesis: Moderating effects, nationally different patterns of change

The convergence process seems to be restricted to the parts of national accounting regulation dealing with information accounting. However, and notwithstanding our first hypothesis, some elements in accounting regulation did not converge. This is explained by our second hypothesis, suggesting that the driving forces are moderated by country-specific insti-tutional frameworks that still differ across countries. These frameworks have an impact on economic actors’ decisions with regard to systemic change, as the institutional structures shape the regulatory demands of actors within the system. In the following paragraphs, we summarize our evidence on the moderating effects of the legal and financial systems and the welfare state type on the general drivers of change (globalization, cri-ses and network effects).


First, the legal system can intervene into the process of change triggered by globalization, crises and emergence of global networks, as the organization of the legal system is largely reflected in accounting regulation. The local accounting practices in civil law countries have always focused on the main-tenance of legal capital and still tend to do so (Kilian 2011). The standards used for such purposes are still largely set by the state and support the long-term stability of companies by restricting corporate payouts. The accounting rules fit into the prevailing governance mechanism; they are complementary in this respect. The same holds for the accounting regulation in common law countries. The protection of equity investors through information is sup-ported by unbiased or neutral financial reporting numbers. Following from that, some parts of the accounting systems are sticky, particularly aggravat-ing the process of change in civil law countries.

We thus observe the emergence of a hybrid accounting regulation inside the civil law countries today: the traditional local rules for individual accounts and the IFRS for group accounts of listed entities. While this might be a transitory regulatory solution, it nevertheless has proved stable for at least several years. In the common law countries, not much change in the general orientation of accounting regulation is observable. For instance, the United Kingdom allows IFRS instead of local Generally Accepted Accounting Principles (GAAP) for single accounts. But this is not a substantial change in regulation because both sets are information-accounting rule sets. No, or only a few, constraints for the adaption of IFRS can be traced back to the legal system of common law countries. The impact is much more severe for code law countries – and hence it is not surprising that major European economies (though not all) have been reluctant to introduce IFRS for single accounts or for the reporting of unlisted companies.

Second, we analyse a potential intervening role of countries’ finan-cial systems. Firms and stakeholders from insider systems do not demand information-accounting rule sets to the same extent as their counterparts in market-based economies. So far this has not changed dramatically, a finding that contributes to the explanation of why the convergence of accounting regimes is limited to the regulation and reporting of listed groups. We found evidence for three moderating effects: the different demands of investors and lenders in general (for instance, the asymmetric loss function of credi-tors and the information demand of shareholders), the closer relationship of debt holders to lending entities in insider economies and the different demands of short-term and long-term investors. This points to the fact that the general drivers of accounting change are dampened in insider systems (Hammermeister 2012).

Finally, we are interested in whether the type of welfare state has an impact on the processes of change. Comparable to the degree to which social safeguards are institutionalized, empirical examples show that there is a connection between the degree to which interests are balanced among


corporate constituencies by accounting and the type of welfare state (Oehr and Zimmermann 2012).

The welfare state type may be said to be the outcome of a political strug-gle about societal values and ideas, and hence it may also affect ‘accounting values’. Residual and institutional welfare states are two (ideal) types of wel-fare states. Both manifestations go hand in hand with specific demands for state intervention. Accounting does not play a role only in assuring market efficiency; hence it is not only a correlate of residual welfare states. By means of accounting, other regulatory aims may be pursued which largely concern distributional issues. In this regard, the function of accounting extends to the balancing of interests between corporate constituencies. Besides explain-ing the underlying regulative intention of accounting, welfare states also explain why some sets of accounts are more important than others, thereby helping to understand boundaries of convergence and why some differences between countries have so far persisted.

Third hypothesis: Institutional frameworks also change, but only incrementally

According to our third hypothesis, the institutional frameworks are also sub-ject to (incremental) change (Hammermeister 2012). This type of change reinforces the process examined here and points to a more fundamental change of socio-economic systems explained by the emergence of a new architecture of the state. In the following paragraphs, we summarize our evidence on change in the sample countries’ institutional structures, that is, their socio-economic systems.

There has indeed been a change in a part of the legal system of civil law countries. Security laws, especially mandatory disclosure provisions, have been significantly expanded for listed entities in civil law countries. However, the primary path of regulation remains stable. The design of the legal systems in civil law countries has only changed to a certain extent for listed groups. Therefore a full convergence of accounting rules for single and group accounts is likely to be inefficient regarding the organization of cor-porate governance.

With regard to financial systems, our data do not point to a transition of bank-based economies into market-based economies (or the other way round). Overall, the financial systems again have at best changed incre-mentally. Some indicators suggest that insider bank-based and outsider market-based economies have become less distinct, but we cannot speak of a convergence of the two systems at this time. In outsider economies, equity capital is still relatively more important than debt capital, and debt raised on markets is more important than credit raised through banks. In insider systems, the majority of companies still rely on non-public debt finance. As the bank intermediation ratios show, banks are the most important source of finance. Moreover, the number of listed companies per inhabitant stays


relatively constant over time. In addition, the observed changes seem to be affected by the upturns and downturns of economies. The highest mar-ket capitalization and number of listed companies in insider economies can be observed at the peak of the New Economy boom around the year 2000. However, the market for corporate control became more active and alike in the countries under scrutiny.

Finally, questions also arise about the stability of the welfare state models. Due to driving forces of all kinds, for instance, neoliberalism, it has been postulated that the nature of welfare provision changes and welfare states converge towards the residual welfare state model (Bambra 2004). Empirical studies have therefore examined whether the various welfare state dimen-sions exhibit convergent developments. At large, the results are mixed, but the detected convergence process of welfare indicators is by and large mar-ginal and not necessarily towards the residual model (for a summary, see Starke and Obinger in Chapter 10 of this volume).

Conclusion

In this chapter, we have proposed a framework that helps to explain the recent changes in financial accounting regulation. Our starting point was the notion that there is strong evidence for international harmonization and new modes of governance. In the new constellation of accounting regu-lation, private and international actors play a more vital role, indicating a move towards a more transnational type of regulation. Based on a frame-work building on evolutionary economics, we showed that the emergence of the new constellation of accounting regulation may be regarded as an outcome of self-transformation triggered by exogenous shocks like globali-zation, crises and ideologies, leading to coercive, mimetic and normative isomorphism, respectively. The analysis, however, also reveals that there are persistent differences in accounting regulation and that these differences may be explained by path dependencies triggered by the relative stability of legal and financial systems and the welfare states (still) in place.

While this chapter, on the surface, deals with accounting issues, it may also be regarded as making an exemplary case for a more fundamental change of the state, particularly for three reasons. First, the three drivers of change (globalization, crises, networking) are general ones that also extend to other policy fields. Our prediction would thus be that the drivers of change gener-ally lead to diminishing regulatory differences between nation states.

Second, we have shown that moderating factors – such as legal, financial and welfare systems – still differ at the national level and that the shape of these systems affects and hinders the quick harmonization of account-ing regimes. Again, this finding seems generalizable. But more importantly, we find that the identified systems at the national level are also subject to change. In our view, this is clear evidence for broader state transformations.


Third, our evidence suggests that the process may be regarded as a process of self-transformation, as changes have been triggered by economic agents. The consequences, however, have not been fully anticipated; thus the out-comes of the process do not necessarily reflect what was on the political agenda. This may be gleaned from the fact that national regulatory actors at times still try to intervene into accounting regulation, but these efforts are increasingly meaningless. Hence what is probably required is a reconfigura-tion of state functions at a higher, international, level, reinforcing the ongo-ing transformations of the state.

However, the new constellation has not yet proved to be stable, and its weaknesses have not been fully addressed. There is probably a lack of legiti-mation of the transnational standard setters that entered the stage (Luthardt and Zimmermann 2009). Also, the quality of the rules set by these institutions is at stake, particularly in the aftermath of the recent financial crisis. Very often, they do not seem to complement the persisting elements of national socio-economic systems. Hence it remains unclear whether this points to problems of adaptation or to more fundamental construction problems of the new architecture – a question requiring further research. Changes thus might, at least to some extent, only be transitory. Further transforma-tions seem to be in the cards, and their outcomes in terms of welfare and legitimation remain unclear.

Part IIILegal Dimension: The Rule of Law

87

5The Effects of International Dispute Settlement ProceduresAletta Mondré

States seek to foster and sustain international cooperation by concluding international agreements. To this end, they enter an increasing number of bilateral and multilateral treaties. The growing density of state obligations arising from international agreements is accompanied by an increase in third-party dispute resolution. New international courts such as the International Criminal Court and the International Tribunal for the Law of the Sea, and an increase in quasi-judicial bodies overseeing such diverse areas as human rights, international administration and environmental protection, emphasize the importance of international law in international politics. The proliferation of third-party dispute settlement has sparked strong academic interest and raised questions on the effects of international dispute resolution mechanisms and their contribution to the functioning of global governance. The primary effect of international dispute settle-ment procedures (IDSPs) is assumed to be the enhancement of interstate cooperation. IDSPs can mitigate power differentials between states by pro-viding safeguards to ensure rule-based decision-making. There is also broad agreement that states use IDSPs to enhance their commitment to interna-tional agreements (Alter 2003, 59).

By and large, the supplementing and occasional replacement of diplomatic methods of dispute resolution with formal legal procedures may foster an emerging rule of law in the international realm, an important development for the future of the sovereign constitutional state (Zangl 2005). The start-ing point is the deliberate transfer of decision-making authority from the national to the international level. When some states agree on establishing IDSPs, they initiate change towards an international rule of law. The process has already started in selected issue areas with the voluntary delegation of tasks to international organizations. The existence of IDSPs in turn raises the expectation that states will use them to settle disputes. If they actually do, IDSPs inform and set limits on state behaviour. Where such IDSPs are in place, they evoke outcomes and dynamics that are removed from direct state control. These dynamics may later influence the design and use of IDSPs in

88 International Dispute Settlement Procedures

other issue areas and limit the range of policy options for states. Thus, in this field, the transformation of the state becomes a self-induced process.

Yet simply noting an increase in third-party dispute resolution does not inform us how serious states are about employing judicial means. It is pos-sible that the creation of such IDSPs is mainly a symbolic act demonstrating a general commitment to the rule of law in international affairs, rather than an indication of substantial change. The contribution of IDSPs to global gov-ernance is much more meaningful when states actually use them for dispute settlement. To understand the effects of IDSPs, it is necessary to investigate how states actually use these procedures. In this chapter, empirical data on state use of selected IDSPs in different issue areas are assessed. The assess-ment deliberately includes different types of IDSPs to capture real-world vari-ance. The set-up of IDSPs ranges from political modes of dispute resolution to fully fledged courts.1

First I review theoretical propositions and previous findings on the question of when and to what end states establish dispute settlement procedures. These propositions beg several empirical questions on the effects of IDSPs. The first is whether IDSPs indeed positively affect state compliance. Another question is whether any type of IDSP can improve compliance. Do differ-ently designed IDSPs have different effects on state behaviour? And, finally, under what conditions do states establish third-party dispute resolution? The next section presents empirical findings. Five cases of IDSPs in a broad range of issue areas of international politics are considered: international trade, international security, human rights, environmental protection and industrial relations. While all agreements selected feature third-party dispute resolution, the institutional design varies greatly across these agreements, and some also have undergone significant procedural changes over time.

The central finding is that IDSPs resembling fully fledged court procedures improve state compliance with international agreements. Put differently, differences in design of these IDSPs do account for observed differences in compliance. This finding empirically confirms a central proposition on the assumed effects of IDSPs. At the same time, states have so far established court-like IDSPs only in some issue areas and thereby created an uneven, area-specific judicialization in the international realm.

The need for settlement procedures

This section starts out by reviewing the scholarly literature on the effects of IDSPs. As this body of knowledge assumes positive effects, the second part of the section addresses the question of when states actually establish IDSPs. Theoretical arguments on the effects of IDSPs are mainly culled from insti-tutionalist international relations theory and international law scholarship drawing on this research approach. Hence it is helpful to briefly summarize the institutionalist view on interstate cooperation.

Aletta Mondré 89

States are taken to be self-interested gain seekers. While states value the opportunity of increasing overall welfare through cooperation, international cooperation does not come about naturally. The main impediment to coop-eration is uncertainty. Uncertainty arises from a lack of knowledge about the intentions of prospective partners. As long as one party is uncertain about the sincerity of the other, it has incentives to forego the potentially greater benefits of long-term cooperation and seek the more immediate, short-term gains that it can achieve by acting unilaterally. There is also the fear of exploi-tation, that is, the fear that the other party may reap the benefits of coopera-tive efforts but will not reciprocate in kind (Keohane 1984). Such behaviour would leave the first party worse off than if it had not attempted to cooperate. Put in the language of institutionalist theorizing, fear of cheating and defec-tion (non-cooperative behaviour) needs to be overcome to make successful cooperation possible. By clarifying rules and providing information on inten-tions, institutions foster long-term cooperation.

In short, IDSPs are said to overcome several obstacles to international cooperation by ensuring parties’ commitment to the agreed rules and inducing compliance. An institutionalized mechanism to detect norm violations reduces the fear that (other) parties will cheat and defect. The fact that signa-tories consent to a dispute resolution mechanism when concluding an agree-ment already signals the credibility of their commitment (Majone 2001b) and encourages states to join the agreement in the first place. More specifically, IDSPs provide for the investigation of alleged norm violations, offering clari-fication – where needed – on the interpretation of treaty rules and indicating whether or not state practices are in accordance with the treaty. These meas-ures reduce uncertainty for all parties and therefore facilitate cooperation.

The bulk of arguments in favour of delegating dispute settlement to third-party bodies centre around enhancing state compliance (Alter 2003, 58–62). The standard explanation of how IDSPs lead to enhanced compliance builds on reputational effects. Governments care about their reputation and may forego short-term interests to build a rule-abiding reputation (Keohane 1984, 105–6, 108; Guzman 2002a). A good reputation makes a state an attractive partner for cooperation both on a short-term and a long-term basis. When states establish IDSPs, they add weight to their promise to honour their obli-gations by agreeing in advance to review the conformity of their conduct and raising the costs of treaty violations (Helfer and Slaughter 2005, 932–6). Guzman (2002b, 309–15) shows in a formal model that a dispute resolution clause signals that states intend to comply with an agreement and makes breaches less attractive because of the reputational loss suffered. As IDSPs identify perpetrators, they produce reputational costs that states wish to avoid and thus pull them towards compliance. A breach of an agreement tarnishes a norm violator’s reputation, imposing reputational costs and warn-ing would-be partners. The identification of norm violations also increases the likelihood that other states will penalize such a breach, for instance,


by employing sanctions (Helfer and Slaughter 2005, 934). The prospect of costs arising through cheating can offset the costs of complying in the first place.

Moreover, a shared understanding of what an agreement actually requires of the parties cannot be taken for granted. Widespread ambiguities in treaties or unanticipated circumstances lead to differing interpretations and require clarification. IDSPs fill gaps in the original treaty when solving disputes and thus help states to achieve their overall objective. They provide relatively neutral information about the facts and the law relevant to a dispute (Posner and Yoo 2005, 14–22). This function is especially significant when taking into account that states frequently do not breach treaty norms intentionally (Chayes and Chayes 1993). Dispute resolution clauses establish actors who are given authority to make meaningful decisions according to their best judgement or professional criteria, and to make these decisions on behalf of a beneficiary. The actors are selected according to their personal or professional reputation (Alter 2008, 39–44). The delegation of decision-making to what Karen Alter labels ‘trustees’ reduces state control over treaty interpretation and thus counters the presumption that the outcome is influenced by politi-cal factors. This gives such decisions greater legitimacy (Alter 2008, 44–7).

Yet it is evident that states only occasionally opt for court-like IDSPs, although we have seen an increase over the past decade. This poses a puzzle, because if the effects of IDSPs are as beneficial to cooperation as just spelled out, one might assume that all international treaties would include dispute resolution clauses. Once states seek to achieve a set goal by concluding an international agreement, all parties should be interested in an overall high level of compliance. However, there is great empirical variation in the design of international agreements. Some establish monitoring procedures such as regular reports by member states; some go much further and include rules on when and how to sanction non-compliance; others create no review struc-tures at all. Only about half of all international agreements include some sort of dispute resolution clause (Cockerham 2007, 738; Koremenos 2007, 190). Provisions that establish mandatory third-party dispute settlement are even rarer; one survey reports that only 20 per cent of all international agree-ments have such a mechanism (Guzman 2002b, 304). This raises the obvi-ous question of the circumstances under which states deem court-like IDSPs useful. A number of reasons why states create highly judicialized IDSPs are suggested in the literature.2 The arguments put forward make general claims and appear to apply to all areas of international politics. While it is not clear whether scholars hold that all factors proposed by them need to be present simultaneously or are of equal significance, no author seems to suggest that one single factor can explain the creation of court-like IDSPs.

The first proposition discussed here has intuitive appeal: IDSPs are more likely to be part of multilateral treaties than of bilateral agreements. Establishing an elaborate IDSP seems unnecessary when there are only two parties to an agreement. The greater the number of parties, the more disputes

Aletta Mondré 91

are likely. Moreover, monitoring costs increase with the number of parties. At the same time, in a multilateral agreement more parties can capture the informational benefits provided by an IDSP (Guzman 2005, 604–5). Scholars have shown that the likelihood of dispute resolution clauses increases with the number of member states (Koremenos 2007, 205–6). Organizations with more members tend to grant easier access, outline clear procedures and make dispute settlement binding (Cockerham 2007, 745–6). Hence this chapter only analyses multilateral treaties with large numbers of signatories.

Another argument relates to the type of problem states seek to address. While coordination problems do not entail incentives for any party to cheat, cooperation problems are much harder to overcome. This is due to the fact that cooperation problems are marked by benefits a party stands to gain by violating an agreement and at least short-term losses it stands to suffer by complying. This makes cooperative behaviour especially costly. Contracting parties are assumed to be aware of such situations. When all parties have roughly the same probability of violating the agreement, adoption of a strong IDSP is more likely (Guzman 2002b, 314). States that lack sufficient information and cannot be sure if the other states have enough incentives on their own to adhere to the agreement insist on the inclusion of provisions that help to pool information and deter cheating. Indeed, if a treaty attempts to solve complex cooperation problems, the likelihood of dispute settlement being delegated increases (Koremenos 2007, 202–7). Complex cooperation problems include uncertainty about behaviour, uncertainty about the state of the world, commitment problems and enforcement problems (Koremenos 2008, 153–4). Put differently, the higher the obstacles to cooperation are, the more likely it is that states include third-party dispute resolution meas-ures in a treaty. While only 30 per cent of agreements that do not address complex cooperation problems make some mention of dispute resolution, about half of those that deal with such problems include dispute resolution provisions. These findings suggest that states make deliberate choices when designing international agreements and establish IDSPs when they are likely to be needed (Koremenos 2007, 209–10). Additionally, the more detailed an agreement is, the more complex the arising disputes tend to be. Court-like IDSPs are institutionally better equipped to settle complex issues (McCall Smith 2000, 148). As a result, when incentives for compliance are low and uncertainty is particularly high, judicialized IDSPs are particularly important and may in turn be expected to have strong effects on state behaviour.

A related explanation for IDSPs draws on the kind of obligation a treaty imposes on its members. Its starting point is the extent to which a treaty requires states to depart from what they would have done in its absence. The extent is termed ‘depth of cooperation’. As deep agreements require more changes in state behaviour, the incentives to violate the agreement are greater. Compliance may be induced by making cheating more costly than cooperating. The deeper the agreement is, the greater are the punishments


required to offset the benefits from violating the treaty (Downs et al. 1996, 383–6). IDSPs make non-compliance more costly in two respects. First, they offer an avenue for detecting breaches and distributing this information. Second, they enable a legitimate response to norm violation. For instance, a dispute settlement body may authorize or impose sanctions against the vio-lating party. We should thus expect highly judicialized IDSPs in connection with stringent treaties. Conversely, agreements with low demands on states have less need to establish a dispute resolution system.

The prospect of enforcement raises a different concern about the design of IDSPs. States have an incentive to accept an IDSP that identifies norm viola-tions accurately and metes out sanctions consistently. With regard to the World Trade Organization (WTO), Schwartz and Sykes (2002) argue that the main reason for the increasing judicialization of the IDSP was not so much lack of parties’ commitment or inadequate compliance but the desire to limit the magnitude of sanctions proportionate to the incurred harm. The new system is better able to protect norm violators from suffering excessive uni-lateral sanctions, as such sanctions are now subject to review prior to impo-sition (Schwartz and Sykes 2002, 200–3). The accuracy of decisions made by dispute settlement bodies becomes more valuable when the probabilities of a breach are unevenly distributed between the parties (Guzman 2002b, 315–19). These findings indicate when states are likely to favour court-like IDSPs. Judgements based on legal reasoning should be better able to meet the demand for accuracy and consistency than a process of political debate.

Broadening the perspective somewhat, domestic politics may also explain why states bind themselves to third-party dispute resolution. Liberal accounts of international relations point to the influence of domestic poli-tics on establishing IDSPs. States entering into international agreements not only make promises to each other but also to their domestic constituencies. Inclusion of IDSPs assures domestic actors of their commitment, especially when private actors are granted access. Raustiala (2005, 595–8) argues that when domestic constituencies are in favour of international cooperation in an issue area they prefer formal contracts. He emphasizes that empiri-cal patterns of agreement design are driven by the structures of domestic politics and interests as well as by concerns about credibility (Raustiala 2005, 609). Where private parties have stronger incentives than states to moni-tor and challenge treaty violations, they seek direct access to IDSPs. These incentives arise where private parties are beneficiaries of obligations between states (Helfer and Slaughter 2005, 939–40). They may either benefit directly, as in the case of human rights treaties, or indirectly, as in countless trade agreements. Powerful, well-organized domestic interest groups that prefer the judicialization of IDSPs to be highly formal push governments to negoti-ate for them (Raustiala 2005, 609). Conversely, when domestic groups lack sufficient political power, for instance, in the case of environmental groups, governments can ignore their demands for strong review structures.

Aletta Mondré 93

A related argument asserts that states opt for legalized international cooperation to bind themselves or successive governments as a deliberate constraint for the future (Goldstein et al. 2000, 393). In his seminal arti-cle on the origins of the European Convention on Human Rights (ECHR), Moravcsik (2000) demonstrates that newly democratic states were particu-larly strong proponents of creating a fully judicialized IDSP to stabilize domestic institutions against future non-democratic threats in Europe. In order to prevent state-sponsored human rights violations, governments of states in transition entered into far-reaching international commitments, thus imposing constraints on future governments. The use of international treaties with IDSPs to bolster domestic policy credibility might be extended to other policy areas. For instance, Mexico sought to accelerate a domestic transition from a statist economy to a market economy by joining NAFTA (Abbott 2000, 522). A coalition between government and business elites then pushed for domestic economic reforms (Thacker 1999).

In sum, IDSPs are assumed to foster cooperation in a number of ways. Third-party dispute resolution reduces uncertainty by providing informa-tion on the intentions of all parties, on the obligations a treaty imposes and on breaches of an agreement. In short, IDSPs raise the costs for non-compliance. Court-like IDSPs in particular may be expected to have strong effects on state compliance. Moreover, states have various incentives to even include forceful IDSPs in an international agreement. Nonetheless, there is great variance in the design of existing IDSPs. Since many of the previously discussed propositions relate to highly judicialized IDSPs, it is far from clear whether and how they apply to different types of IDSPs. The next section seeks to address this question.

Assessing different IDSPs

Several considerations guided the selection of IDSPs. First, preference was given to IDSPs built into comprehensive treaties with broad member-ships and – where available – to those that have undergone some degree of consolidation over time. The samples contain data from a period in the 1970s/1980s and a period in the 1990s/2000s for each regime. Second, the IDSPs vary in institutional design so that we could study whether procedural differences have an effect on state behaviour. These aspects allow within-case comparison and thus help to mitigate the complexities of comparing state behaviour across different IDSPs dealing with different issue areas. To assess state behaviour in comparable situations, a specific dispute subject was selected for each field. Third, research was based on disputes over specific norms, irrespective of whether states sought a settlement within or outside the respective IDSP, in order to establish whether states actually use avail-able IDSPs. Further, for reasons of comparability, the study was limited to disputes involving OECD states. This group of states is most likely to have


the adequate resources to implement international agreements faithfully as well as to call on IDSPs. Finally, a number of issue areas were included to give a broader picture. Much previous research was based on studying inter-national trade only, so it is useful to examine how well these findings can be transferred to other policy fields.

For the area of international trade, the study focused on the General Agreement on Tariffs and Trade (GATT) with its initial panel procedure and the subsequent dispute settlement system of the WTO. The chosen disputes deal with import restrictions on foodstuffs. In the area of human rights protection, the data are on alleged violations of Art. 5 IV of the ECHR, which grants the right to a prompt review of the lawfulness of detention. The respective inter-national dispute settlement bodies are the European Commission on Human Rights and the European Court of Human Rights. The monitoring mechanism of the Convention on Trade in Endangered Species (CITES) – an example from the area of environmental protection – was analysed with respect to allegations that insufficient domestic measures were taken to implement the treaty. For industrial relations, the two IDSPs of the International Labour Organization (ILO) that decide over breaches of freedom of association were investigated as they are laid down in Conventions No. 87 and No. 98. In the realm of interna-tional security, the UN Security Council was assessed in terms of its function of restraining threats to international peace.

Various differences in the design of the IDSPs investigated are obvious. Some bodies are fully fledged courts, mirroring domestic courts, while others are more a forum for diplomacy and negotiation. Not all bodies tasked with addressing treaty violations are necessarily modelled on courts, but they may still fulfil similar functions, that is, evaluating facts, interpreting the relevant treaty rules and rendering decisions. The assessment deliberately includes political modes of dispute resolution. Most international agreements rely on non-judicial IDSPs.

The formal degree of judicialization of any IDSP may be assessed on a gradual scale covering access, political independence, extent of procedural obstacles, mandate and authority to sanction.3 The more formal the degree of judicialization, the greater the impartiality of an IDSP is likely to be. By adding up the values for each criterion for a given IDSP, different IDSPs can be compared. The result is a sliding scale of modes of dispute settlement ranging from diplomatic at one end to quasi-judicial in the middle range and fully judicialized at the other end. The European Court of Justice and the WTO Appellate Body exhibit the highest degree of procedural judiciali-zation, while both the ILO and CITES committees occupy the middle range as does the lapsed GATT panel system; unsurprisingly, the Security Council displays the lowest degree of procedural judicialization and lies closest to the diplomatic end of the scale.

The following examination of these cases reveals that differences in the degree of procedural judicialization of IDSPs correspond to systematic

Aletta Mondré 95

differences in the behaviour of states in the use of and compliance with IDSPs. The empirical findings suggest that only quasi-judicial IDSPs show positive effects on state compliance. States adhere better to the provisions of more judicialized IDSPs. States are also more inclined to use IDSPs for settling disputes when the degree of procedural judicialization is high. Moreover, states comply more often with rulings handed down from highly judicialized IDSPs than with those from less judicialized IDSPs. The data suggest that states even comply faster and with less resistance with rulings from highly judicialized IDSPs than with those character-ized by medium or low formal judicialization. In short, the design of an IDSP matters greatly (Zangl 2008). On the scale measuring the degree of formal judicialization of dispute resolution systems, only those at the far end, and with a high degree of judicialization, affect state behaviour significantly.

For each case, we investigated how states dealt with allegations of norm violation. One question of particular relevance was whether states used the relevant IDSP at all to lodge a formal complaint. Data were collected on the behaviour of the party which had raised an allegation and on the behaviour of the defendant after the allegation was made until the dispute ended. Once the allegation was investigated by the international dispute settle-ment body, the length of the implementation phase was measured from the date of decision on each dispute to the actual implementation of the decision. The duration of that phase serves as an indicator of how well an IDSP induces compliance. In cases of non-compliance, the end of the implementation phase was set at the date when the respective interna-tional dispute settlement body decided to recommend sanctions to enforce compliance.4

International trade

The original GATT treaty did not provide detailed rules for dispute resolution. The panel system set up to decide disputes arising from the treaty evolved out of state practice and was successively institutionalized and formalized (Stone Sweet 1997, 120–33). As an IDSP, the panel system combined diplomatic negotiation with adjudication. The first step towards dispute settlement was bilateral negotiation, possibly followed by third-party review in the second stage. The degree of formal judicialization was low (Mondré et al. 2010). Only state parties had access to the procedure. Moreover, the formation of a panel could only be invoked with the unanimous approval of the GATT Council, which comprised all GATT members. As a result, both the com-plainant and the defendant could prevent panel formation and decisions. When the disputing parties agreed on using the procedure, panel members possessed a remarkable degree of independence to investigate a case. A panel consisted of three experts, each acting in an individual capacity. They could only give recommendations and were not only supposed to reason on the


basis of the GATT rules, but were also expected to consider political implica-tions. The panel report had to be adopted by the GATT Council to become effective, and if the recommendations were not satisfactorily implemented, sanctions had to be approved by the Council in a separate decision requiring consensus.

With the institutional evolution from GATT to WTO, a new dispute set-tlement procedure was established comprising the Dispute Settlement Body and the Standing Appellate Body. This IDSP enjoys a high degree of formal judicialization. While access is still limited to states, other aspects of the procedure have been substantially strengthened. Procedures and reports can only be averted with the approval of the complaining party, which is highly unlikely. Parties may appeal against a panel report, which is then reviewed by the Appellate Body. The Appellate Body consists of fully qualified law-yers and bases its decisions exclusively on existing WTO rules, which forces the preceding expert panel to also consider these rules when drawing up its report, as it might be reviewed accordingly. Persistent violations of rulings are met with sanctions that are authorized by the Dispute Settlement Body more or less automatically. From negotiation to implementation, each step of the dispute settlement process is now subject to a detailed timetable to ensure speedy resolution.

Data were collected on disputes over import restrictions on foodstuffs. States submitted roughly three quarters of all disputes from the sample to the new WTO dispute settlement body; by comparison, the old GATT procedure had only been used in little more than half the disputes, and in some cases under the old system parties even took retaliatory measures before engaging in any dispute settlement attempt (Helmedach 2009). The implementation phase averaged 17 months when the highly judicialized WTO procedure became available. As long as states had only recourse to the less judicial-ized GATT procedure, implementation took, on average, five months longer, that is, 22 months. The procedural change of the IDSP to a court-like design improved compliance. First, the duration of implementation was reduced. Moreover, open defiance of treaty rules also decreased with the formal judi-cialization of the IDSP. During the 1990s,when the highly judicialized IDSP was in place, states failed to comply with bilateral agreements and Appellate Body rulings in only 4 out of 39 disputes. Even though some states did not initially comply with decisions of the Appellate Body, in all of the disputes sampled these states eventually acted within the procedures. The remaining disputes were either dropped or solved by bilateral negotiations. Under the GATT panel system, alleged norm violators stuck to their behaviour in nearly a third of all disputes (4 out of 11).

The revised IDSP had another interesting effect on state behaviour. States settled a large proportion of disputes during the mandatory bilateral con-sultations. States accused of a norm violation were willing to change their conduct when faced with a strong IDSP rather than risk an adverse ruling.

Aletta Mondré 97

This points to the ‘shadow of the law’ – the mere availability of a court-like IDSP and the prospect of being publicly identified as having breached treaty obligations induced cooperative behaviour. Yet the establishment of the new dispute resolution system can be attributed to so many of the outlined propositions that it seems overdetermined. Membership increased from 87 in 1983 (marking the middle of the first investigation period) to 112 in 1995 (when the new IDSP took effect) and to 144 in 2000 (at the end of the second investigation period). The move from GATT, which covered trade in goods, to the WTO, which also deals with trade in services and intellectual property, significantly augmented the complexity of problems addressed. The treaty is also a prime example of a deep agreement. In addition, highly organized, influential domestic interest groups such as business associations benefit from the comprehensive free trade regime.

Protection of human rights

The ECHR established not only substantive norms but also an elabo-rate dispute settlement system. As the main goal of the Convention is to ensure the protection of human rights through the member states’ domestic legislation, the dispute settlement system is only accessible when domestic remedies are exhausted. Individuals, NGOs and states may make a claim under the Convention machinery. The initial system assigned three different bodies partly separate and partly overlapping tasks. Prior to 1998, admissi-bility of a complaint was assessed by the European Commission of Human Rights. The Commission was composed of independent experts, each acting in their personal capacity. It first sought to bring about a friendly settlement. If no settlement could be reached, the Commission would consider the mer-its of the case and draft a report. The Commission could then submit the matter to the European Court of Human Rights.

The bench of the Court is composed of independent judges who use legal reasoning to make their decisions. In the past, if a case was not referred to the Court, the Committee of Ministers decided whether it constituted a violation of the Convention and passed a resolution accordingly. The Committee comprised one representative from each member state, usually the foreign minister. Findings were based on the respective reports by the Commission and required a two-thirds majority. Decisions of either body were binding and proceedings could not be obstructed by the state alleged of treaty violation. There were no provisions for material sanctions, although the Committee of Ministers was charged with monitoring state compliance. All in all, this IDSP enjoyed a high degree of formal judicialization, which was even strengthened by reforms taking effect in 1998 (Zangl et al. 2012, 387). As a consequence, the Commission was abolished and all its tasks are now performed by the Court. Individuals may apply directly to the Court, which decides on all cases. Since then, the Committee’s sole function has been to supervise compliance (Sundberg 2001). The IDSP itself did not gain


any additional power to sanction and, as before, the Committee can at most suspend a state’s membership in the Council of Europe.

In the European human rights regime, decisions sometimes require changes in the law of the respective state to make national legislation conform with the Convention.5 In the sample, implementation of such changes took one year, on average, before the procedural reforms. Interestingly, quite a num-ber of states amended their law in anticipation of a decision even before an official judgement was rendered. After reforms strengthened the independ-ence of the European Court of Human Rights even further, required changes to domestic law took eight months on average. All states also eventually complied with the rulings (Blome and Kocks 2009).

This case study demonstrates that even a further strengthening of an already highly judicialized IDSP has a positive effect on compliance. States became faster in bringing domestic laws into line with the Convention. As the treaty regulates the relationship between a state and its citizens, third states do not directly depend on the cooperation of another party to protect human rights in their territory. For this reason, some of the arguments on the effects of IDSPs introduced above do not relate directly to this issue area. However, with the democratization of the Eastern European states, many new members acceded to the Convention, and the significant increase in membership underlined the need for reform. The revised IDSP streamlined the access of individuals to the Court and thus did away with the time-con-suming review process (Bernhardt 1995, 146–7). Due to the steady increase of complaints, the reform was mainly driven by an interest in improving the system’s efficiency (Schlette 1996, 926).

Environmental protection

CITES member states are bound to control the import, export and transit of all species that are listed in three appendices, prioritized by threat of extinc-tion. The Convention provides a compliance procedure that concerned actors may use for dispute settlement. This IDSP initially featured a low level of formal judicialization (Mondré et al. 2010, 6–7). States, NGOs and even individuals may lodge a complaint with the CITES Secretariat if a party is not adequately implementing the treaty. The Secretariat may also initiate inves-tigations in its own right and serves as a gatekeeper for further proceedings. It is made up of international civil servants who are formally independent of the state parties. These officials enjoy a large degree of discretion in inter-preting the provisions of the treaty and are not bound to a narrow standard of legal interpretation. On the downside, however, their recommendations are the product of a somewhat opaque procedure and are not binding. If a member state ignores recommendations made by the Secretariat, the latter may bring the case either to the Conference of Parties or to the Standing Committee,6 which then decides on the matter. Both bodies are composed of state representatives, and their decisions are vulnerable to political pressure.

Aletta Mondré 99

If a state that is accused of a treaty violation is able to organize a majority in its favour, either body can water down the Secretariat’s decisions. However, the Conference of Parties and the Standing Committee may also advise all member states not to accept trade permits originating from the offending country. This amounts to an authority to impose collective sanctions (Sand 1997, 38–9).

During the 1990s, the Conference of the Parties and the Standing Committee both began to make regular use of their authority to recom-mend trade sanctions against states found in breach of the treaty. This new practice amounts to a procedural change, raising the IDSP’s level of formal judicialization to medium. This informal revision has affected compliance. States implemented the rulings faster when faced with possible sanctions. The average time span until implementation decreased by nearly half to 43 months in the 1990s as compared to 80 months in the earlier investigation period. In the end, states did comply with the demands in all disputes during both decades under investigation (Neubauer 2009b, 182). However, slightly fewer states cooperated with the Secretariat in investigating alleged norm violations, and there was also a small drop in the use of the IDSP to deal with violations in the later period (Neubauer 2009b, 173–7).

The most notable effect of the IDSP is the significant reduction of the time it took states to alter their behaviour once the option to impose sanctions was used regularly. However, while member states were quicker to bring their behaviour in line with CITES provisions when faced with a more judicial-ized IDSP, they had already eventually complied with CITES rulings before. Contrary to the expectations discussed earlier in this chapter, the dispute resolution system was not seriously reformed. Even after sanctions became more widespread, the parties did not revise the IDSP to make decision-mak-ing more accurate or independent. Likewise, the increase in membership from 89 in 1983 (middle of the first investigation period) to 120 in 1993 (middle of the second investigation period) and to as many as 143 in 1997 did not spur formal judicialization. This case seems to indicate that the lack of powerful domestic environmental groups in most member states relieved governments of the pressure to install a court-like review structure at the international level (Raustiala 2005, 602–3).

Industrial relations

The ILO, the first-ever specialized UN agency, is the global body responsible for drawing up and overseeing international labour standards. Its unique tripartite membership brings together representatives of governments, employers and workers. From the start, the ILO has provided mechanisms to supervise state compliance with labour standards and formal complaints procedures (Boivin and Odero 2006, 207). Data were collected on alleged violations of the freedom of association – one of the core international labour standards. Alleged violations of this norm, which is guaranteed


under the ILO Constitution, are mainly dealt with by one of two ILO bod-ies: One is the Committee of Experts on the Application of Conventions and Recommendations (CEACR), the other one is the Governing Body Committee on Freedom of Association (CFA). Both were established in 1951. Formal judicialization of both IDSPs is held to be medium-level (Neubauer 2009a, 195–202). They give access to complaints by employers’ organiza-tions and trade unions.

The CEACR is part of the regular supervisory system that reviews peri-odic reports supplied by member states and identifies non-compliance. The Committee of Experts is composed of 20 renowned legal specialists, each act-ing in a personal capacity and appointed for a renewable three-year term. The Committee’s mandate is to impartially determine whether member states have violated ILO conventions, and it may request governments to take spe-cific measures. States accused of violations have no means to impede investi-gations by the Committee of Experts. All findings are published in a report. Especially blatant violations may be passed on to the tripartite Conference Committee on the Application of Standards for further examination.

The specialized CFA also considers complaints about infringements on the freedom of association. It consists of an independent chairperson and three representatives, one each from governments, employers and workers, and appointed by the Governing Body from its members. Its mandate is to deter-mine whether national legislation or practice conforms to the relevant con-ventions. The CFA may review complaints about whether or not the country in question has ratified the relevant conventions and decides autonomously on the admissibility of complaints. Governments are supposed to cooperate with investigations, but the CFA may proceed without their consent. With regard to decision-making, the CFA has organized its activities according to a set of legal principles and developed procedural rules as well as a body of principles that resemble quasi-jurisdictional procedures (Gravel et al. 2001, 21, 68).

No representative or national of the state against which a complaint has been made may be present at the Committee’s deliberations on that com-plaint. If the CFA finds that there has been a violation, it makes recommen-dations on how the situation could be remedied. Findings are referred to the Governing Body for approval. Technically, the Governing Body could reject the recommendations. Once approved, the CFA may monitor progress itself or refer the case to the Committee of Experts. Neither committee may recommend material sanctions against states found to infringe freedom of association, but they may exert moral pressure by publishing their findings and continuing to discuss the complaints in different ILO bodies.

While the ILO IDSPs did not undergo formal changes, their use has been modified. By far, more disputes over violations of freedom of association were referred to the committees in the 1990s than in the 1970s (Neubauer 2009a, 206). Labour associations from OECD countries were obviously more

Aletta Mondré 101

prepared to charge their respective governments with violating ILO norms in the post-Cold War era. In addition, states accused of norm violations were much more willing to make use of the IDSPs and sought settlement outside the ILO in only two disputes (Neubauer 2009a, 207–8). During the 1970s, OECD governments had dealt with all sampled allegations outside these committees, yet this willingness was not accompanied by a readiness to comply with the IDSPs’ recommendations. Nearly two-thirds of disputes were not settled, as states refused to implement the changes required either outright or for extended periods (Neubauer 2009a, 212–14). Due to these circumstances, no reliable average duration of the implementation phase can be calculated.7 When states eventually complied, this was largely due to a change in government. There was only one dispute in which the accused government adhered continuously to the procedure; in this instance, imple-mentation took 16 months.

These IDSPs have hardly any effects on state compliance, despite a medium level of formal judicialization. The increasing transnational production of goods also makes labour standards in third countries a concern and thus raises incentives for international cooperation. To the extent that the ILO core norms require changes in domestic law, ILO membership demands adjustment of national policies. Moreover, domestic interest groups in the form of organized labour and business associations are even part of the review structure. Yet the lack of material sanctions may relieve states of the need to adhere to these IDSPs.

International security

The UN Charter assigns primary responsibility for the maintenance of international peace and security to the Security Council. If conflicting parties are unable or unwilling to reach a settlement, they are called upon to refer the matter to the Security Council, which provides an arena for dis-pute settlement. The mechanism relies on diplomatic decision-making and is characterized by a low degree of formal judicialization (Mondré et al. 2008, 12–13). Only states may refer disputes to the Security Council.8 States typi-cally refer a matter by a letter that contains details on the dispute. Council members have decision-making authority but are not impartial third par-ties. The body consists of five permanent members – China, France, Russia, the United Kingdom and the United States – and ten additional members elected on a rotating basis. Delegates to the Council are state envoys who represent their respective country’s foreign policy. Council members have to respect the principles of international law, but their decisions are based on political considerations. In fact, the Council was designed as a politi-cal body. It is supposed to settle disputes by making recommendations or mandating appropriate measures. The Council can take up a matter that has been put before it, but it is not required to do so. Decisions require a quali-fied majority. The permanent members are vested with veto powers, which


enable some Council members to bar unwelcome decisions single-handedly. The Security Council may authorize UN member states to impose sanctions on states found to threaten international peace. Again, however, any of the permanent members may obstruct such authorization.

In both periods, states brought the same number of disputes meeting our selection criteria to the Council. While the overall use of the IDSP for dis-putes fitting the sampling criteria did not change, OECD states used the Council more often during the 1990s. However, OECD states only complied in those instances in which the Council took a decision that was in line with their preferences (Mondré 2009, 155). During the 1970s/1980s, implemen-tation of Security Council decisions took 92 months on average. While the procedure was not formally changed, that time dwindled to 11 months in the 1990s. This remarkable drop is not due to improved state compliance, however. Rather, it is a side effect of the Security Council making more use of its strongest enforcement measures during the 1990s. In many disputes, only short periods of non-compliance were accepted before sanctions were authorized. This accounts for the average reduction of the implementation phase. In both time periods, states found to pose a threat to international security did not comply with Council decisions unless they suffered military defeat. A remarkable number of disputes put to the Council were not dealt with in this procedure (Mondré 2009, 147–53). Some of these were resolved in negotiations, and some were not formally settled at all.

As an IDSP, the UN Security Council is characterized by a low degree of for-mal judicialization. The IDSP did not induce much compliance on the part of OECD states. Hence these findings are at odds with our theoretical assump-tions on the establishment of highly judicialized IDSPs. Near-universal UN membership implies a great need for monitoring. International security is definitely marked by high uncertainty and complexity. The UN Charter’s provisions regulating the use of force are also a deep agreement. Moreover, the severity of sanctions the Council may impose should make depoliticized decision-making likely. Yet the best support for any of these propositions is the fact that there is a dispute resolution system at all. The willingness of states to yield to an international IDSP in the field of security is still low.

Conclusion

The empirical findings demonstrate that differently designed IDSPs affect state behaviour differently (Table 5.1). The least judicialized IDSP, namely the decision-making procedure in the UN Security Council, had the least impact on state behaviour and failed to induce compliance. By contrast, the highly judicialized IDSPs achieved successful settlements with high compli-ance rates. Of the IDSPs located between these two poles, CITES enjoys a remarkably high compliance rate in the long run, while this is not the case for the ILO.

Aletta Mondré 103

Considering all five cases together, the data point to the existence of a threshold an IDSP has to cross before it has strong positive effects on state compliance. Let us remember that the assessment of each IDSP was based on criteria that measured the existence of institutional safeguards to ensure impartial treatment of disputes. The level of formal judicialization of an IDSP is high if broad access rights are granted and opportunities to block a decision are kept at a minimum, decisions are binding and reached through legal reasoning, and regulations are clear on the authorization of sanctions. The higher the score on each criterion, the more court-like an IDSP is. The threshold is clearly located close to the far end of the scale, where we find quasi-judicial IDSPs. Once the design of an IDSP ensures that the dispute resolution system crosses this threshold, rates of state compliance increase noticeably and states act faster to assure compliance after an adverse ruling.

We therefore conclude that the overall design of IDSPs does matter. Another indication is the issue of sanctions. The ability to impose costly enforcement measures is often cited as an important mechanism for inducing compliance. Sanctions offset the benefits of non-compliance. The IDSPs related to WTO and CITES were formally strengthened in this regard. Compared with the dispute resolution system of the UN Security Council, however, it should be noted that the authority to sanction alone does not show much of an effect on state compliance; rather, it is the combination with the overall degree of formal judicialization that matters. This finding is further substantiated by the fact that states took more time to implement CITES decisions than WTO rulings. The lack of sanctioning authority on the part of the ILO’s IDSPs may explain why their recommendations fail to induce compliance despite their medium degree of formal judicialization.

Further evidence for the existence of such a threshold is the finding that it is not arbitrary which move towards more formal judicialization has a noticeable effect on state behaviour. Certainly, the greatest increase in for-mal judicialization was the move from the GATT panel system to the new WTO procedure, accompanied by the setting up of the Appellate Body. This corresponds with the greatest improvement in state compliance. Yet even the further enhancement of procedures that are already highly judicialized

Table 5.1 Effects of different IDSPs on compliance

Change in formal judicialization of IDSP Change in compliance

GATT/WTO Low → high High improvementECHR High → high Some improvementCITES Low → medium Some improvementILO Medium → medium No improvementUNSC Low → low No improvement


shows effects on the average duration of implementation. While the reform of the European human rights regime was much less sweeping than that of the trade regime, the implementation phase was shortened by roughly the same extent. Highly judicialized IDSPs are more efficacious because they can rely on more factors inducing states to comply (Zangl 2008). They raise the reputational costs as well as the material costs for non-compliance. In addi-tion, they enjoy greater legitimacy, which in turn strengthens respect for and fosters the use of their procedure (Helfer and Slaughther 1997, 284). These statements help to clarify why states do not necessarily shy away from using highly judicialized procedures. For instance, many more disputes have been brought to the WTO than were brought to GATT panels. Conversely, a lesser degree of judicialization does not make IDSPs more attractive for states, as evidenced by the low use of the IDSPs with medium and low degrees of for-mal judicialization.

These findings corroborate the emphasis scholars have placed on inter-national courts and tribunals. At the same time, new emphasis is put on the question of the conditions under which states establish court-like IDSPs. When it comes to inclusion and design of dispute resolution provisions, the great variation of international agreements is striking. While the connection between highly judicialized IDSPs and state behaviour is evident, it is less clear whether the willingness of states to commit to an agreement results both in accepting strong IDSPs and high levels of compliance or whether one set of factors accounts for establishing highly judicialized IDSPs and another set for high compliance rates. Compliance may be induced by the same factors that led states to believe the respective agreement was in their interest in the first place.

With regard to the number of treaty members, there was an increase in membership of both the WTO and the ECHR that corresponds with an increase in formal judicialization. On the other hand, membership also increased in CITES, ILO and the UN, but was not attended by a shift towards more formal judicialization.9 Some of the cases confirm the discussed propo-sitions as to when states establish IDSPs with a high degree of formal judi-cialization, although the overall support for them is not strong.

The willingness of states to create highly judicialized IDSPs seems to depend to some degree on the issue area of international politics. This obser-vation should remind scholars to apply some caution when making infer-ences about the role of international law in global politics based solely on remarkable developments in international trade. The WTO is the most com-prehensive treaty that has established a highly judicialized IDSP. In stark contrast to this, reliance on diplomacy instead of resorting to judicialized dispute settlement is almost held to be self-evident in the realm of interna-tional security.

Further research should systematically explore what enables deep coopera-tion backed by highly judicialized IDSPs in some areas rather than in others.

Aletta Mondré 105

Such investigations would have to identify the relevant factors in more detail than does the binary ‘high versus low stakes’ divide. Empirically, there are no highly judicialized IDSPs in the area of international security. Yet if security turns out to be the only issue area without such IDSPs, we do not gain much insight on the variation in all remaining policy fields by pointing to such a simplistic divide. Some policy fields may lend themselves more to legal dispute settlement at the international level because states already accept legal instruments at the domestic level. The field of human rights protection comes to mind here. Questions regarding variations within an issue area also need to be addressed. A prominent example from the area of environmental protection is the monitoring mechanism of CITES with some elements of a judicialized IDSP. While there are other environmental agreements that also include monitoring devices, most environmental agreements are nei-ther deep nor backed by judicialized IDSPs (Crossen 2004). At the same time, the need for cooperation to reap mutual benefits is at least as great when it comes to environmental protection as it is in international trade. Having established the effects of court-like IDSPs on state compliance is not the same as saying that the numerous quasi-judicial bodies with some degree of formal judicialization and barely judicialized dispute resolution mechanisms play no role in global governance. Rather, these types of mechanisms seem to call for different research questions if we want to understand their real contribution to international cooperation.

Notes

1 The data were collected together with Kerstin Blome, Achim Helmedach, Alexander Kocks and Gerald Neubauer in a collaborative TranState research project directed by Bernhard Zangl and, later, Andreas Fischer-Lescano.

2 For a review of the early literature, see Helfer and Slaughter (2005, 931–41).3 Similar elements have been proposed and used by other scholars; see Yarbrough

and Yarbrough (1997), Keohane et al. (2000) and McCall Smith (2000).4 If no decision on sanctions is taken, the respective dispute ends in the implemen-

tation phase, as no consecutive enforcement phase has been reached.5 The average duration of implementation reported here relates only to such amend-

ments to national legislation and does not include payment of compensation to individuals. This study analysed only admissible lawsuits, as it was not possible to identify alleged violations independently of the IDSP.

6 The Standing Committee has existed since 1987. Its forerunner was the Technical Experts Committee, established in 1979 and renamed the Technical Committee in 1983.

7 There were three disputes in which states eventually complied with ILO recom-mendations. On average, implementation took 86 months in these cases.

8 The UN Charter also grants the UN Secretary-General the right to bring to the atten-tion of the Security Council any matter which may threaten international peace.

9 To be fair, the authors find an increase in the likelihood of third-party dispute resolution – not a certainty. Moreover, only multilateral treaties with at least a low degree of judicialized dispute settlement were included in the present study.

107

6Internationalizing Law against the Odds: The Power of Courts and Their LimitsSusanne K. Schmidt, Michael Blauberger and Tilman Krüger

One major transformation of the constitutional state is the loosening of the nexus between territory and law. The growing density of European Union (EU) and international law and the interpenetration of domestic legal orders have led to an increasingly complex system of overlapping legal orders. Consequently, in order to determine which law applies when, procedures and boundary rules are required, and usually it is international courts that interpret and apply these kinds of rules. Our contribution seeks to explain why and under what conditions international courts promote legal inter-nationalization even against the resistance of national governments. Given the interest of individual nation states in safeguarding their sovereignty, it is surprising that international courts are able and willing to do so.

Empirically, we focus on the evolving legal interpretation of the four fundamental freedoms in the EU (goods, services, persons and capital) and on trade liberalization in the World Trade Organization (WTO). For this purpose, court judgements as well as the surrounding legal and political debates are analysed and the study is complemented by background interviews. Theoretically, we advance a historical-institutionalist argument, namely, that under certain circumstances, international courts may set in motion a process of path-dependent legal integration. First, to ensure coherence and legal certainty, courts build on legal precedents and, consequently, growing case law develops a momentum of its own. As will be shown, the European Court of Justice (ECJ) established fundamental boundary rules between European and national law, beginning with the free movement of goods and gradually transferring its legal reasoning to other contexts – even though the functional requirements differ between market freedoms. Second, once an expansive legal interpretation becomes established, it offers new opportunities for private litigants benefiting from free trade. These opportunities reinforce expansive legal interpretations and become a major driving force towards legal interna-tionalization. Given the high consensus requirements of international deci-sion-making, it becomes increasingly difficult for national governments to politically control or correct the path of legal internationalization.

108 Internationalizing Law against the Odds

By comparing the jurisprudence on the four market freedoms and at different levels (EU, WTO), we can also identify preconditions and limits of court-driven legal internationalization. In contrast to the other market free-doms, European Treaty rules on capital movement lacked direct effect for dec-ades, and thus court activism was constrained; no positive feedback from private litigation could develop. By revising the Treaty rules and making the free movement of capital directly effective, EU member states facilitated a self-reinforcing dynamic of integrationist court judgements, quickly catch-ing up and converging towards the other market freedoms.

In the WTO, the Appellate Body has shown in various reports its determi-nation – albeit to a lesser extent – to promote legal internationalization in ways that are comparable to the ECJ. In contrast to the EU context, however, the role of precedent is contested in the WTO and member states still control access to the dispute settlement system. They are therefore able to constrain a large part of the potential for judicial expansionism.

The next section presents the theoretical framework of this chapter and its main argument on the path dependency of international jurisprudence. In order to illustrate this argument empirically, we then trace the jurisprudence on the free movement of goods, services and persons in the EU. In the two sections thereafter, we explore the limitations and premises of our argument by comparing these developments with the free movement of capital in the EU and trade liberalization in the WTO. The concluding section summarizes the main findings and outlines two routes for further research.

International courts, legal precedent and path dependency

Why would international courts develop case law that surpasses what member state governments support politically? And to what extent are they able to rule against important national interests in the first place? The latter question of the independence of international courts is the subject of an increasingly elaborate legal and political science literature. Traditionally, international law and international courts used to be regarded as rather weak (Zangl 2009, 25). Given that they have no enforcement capacity of their own, international courts depend on member states to implement their decisions. Moreover, principal–agent theory tells us that governments only delegate adjudicative competences with a high degree of caution, building in safeguards against agency loss (Tsebelis and Garrett 2001, 363).

Yet the characterization of international courts as member state agents has increasingly been questioned (Alter 2008, 33–6). By default, international treaties are concluded under uncertainty and based on political compro-mises; they are incomplete contracts and often leave international courts considerable room for interpretation (Abbott and Snidal 2000, 433). To the extent that international treaties are about overcoming collective action problems, member states share an interest in independent adjudication

Susanne K. Schmidt, Michael Blauberger and Tilman Krüger 109

in order to make cooperation binding. In practice, judicial independence mainly derives from the difficulty to correct such jurisprudence politically. Changing the Treaty rules in the EU and the WTO, for instance, requires una-nimity among member states. The ‘joint-decision trap’ (Scharpf 1988) pro-tects international courts from being overturned. Compared to the national level, one may surmise, the separation of powers at the international level even strengthens the judiciary. This leads Alter (2008, 55) to argue that the independence of international courts may generally be presumed.

The ECJ is usually regarded as one of the most powerful international or supranational courts, often even compared to national constitutional courts (Stone Sweet 2010, 2). While the founding members of the European Community agreed on the need for an independent arbitrator, they were unable to come to a decision on the relationship between European and national law. As is well-known, it was the ECJ which, in 1963, decided in Van Gend en Loos (Case C-26/62) that to become effective European law did not need to be transposed into national law but, under certain circumstances, had direct effect. In 1964, moreover, in Costa v. E.N.E.L. (Case C-6/64), the ECJ ruled that European law was supreme vis-à-vis national law. Supremacy and direct effect – which the ECJ slowly extended from Treaty provisions to all kinds of European legal documents – were the cornerstones for turning the EU into a federal legal order. Yet as the ECJ does not possess means of its own to enforce its rulings, member states still may constrain court activism by not implementing its case law. Here one feature of the European polity is particularly important: In the EU, national courts at any level may directly refer questions concerning EU law to the ECJ if they deem them relevant for deciding the case at hand. Lower courts are highly motivated to use such preliminary proceedings, as they normally enable them to settle their cases without being overturned by higher-level national courts. Moreover, as national courts apply European law, a unified court system develops, making it impossible for member states to ignore European legal obligations without also harming the independence of their own national court systems (Alter 1998). In short, the ECJ is a powerful court.

Other international courts, such as the European Court of Human Rights, the International Criminal Court or the judicial bodies of the WTO, do not possess the instruments available to the ECJ, but they have nevertheless been deemed quite powerful as well (Abbott et al. 2000, 406, 416). In particular, the dispute settlement system of the WTO lends itself to a comparison with the ECJ, given that the EU is primarily an economic community and less involved in criminal prosecution or human rights protection. Not only are important provisions in EU and WTO law identical – such as Arts. 34 and 35 of the Treaty on the Functioning of the European Union and Art. XI of the General Agreement on Tariffs and Trade (GATT) – what is per-haps more important is that the judiciary has a particularly strong role to play in the WTO as well. The ‘judgements’ – or reports as they are called


in the WTO – of both panels and the Appellate Body are legally effective unless they are rejected by consensus, which has never happened to date. At the same time, political consensus on correcting these decisions is almost impossible to achieve (Ehlermann 2002b, 302). Its high degree of independ-ence (Charnovitz 2002, 230) and the de facto functioning of legal precedent (Trachtman 1999, 339) further enlarge the Appellate Body’s powers. All of these factors provide the Appellate Body with a role similar to that of the ECJ regarding decisions on the legality of trade restrictions (Scott 2004, 311).

For judges it is one thing to establish case law that deviates from the origi-nal ‘legal contract’. But even if member states find it difficult to constrain international courts, it is still quite another thing to assume that the case law of these courts necessarily develops in a direction member states do not support. Also, it lies in the self-interest of international courts to come up with non-contentious rulings so as not to risk their long-term legitimacy. While sharing the assumption that courts aim not to stray too far from a generally accepted line of policy, we argue that the path dependency of case law leads to a dynamic process that promotes international legalization even against the resistance of national governments. In the next section, we will show this for the interpretation of the four fundamental freedoms in the EU. Before that, however, we need to discuss to what extent it might be useful to apply the concept of path dependency to case law.

Path-dependent processes are characterized by positive feedbacks, which make it highly unlikely that a path once taken will later be changed (Mahoney 2000, 512–26). The original choice of one path over another for, say, a certain technical standard or a legal interpretation is often characterized by coincidence and, initially, the situation of choice might not even have been perceived as a critical juncture (Pierson 2000, 263). Positive feedbacks, however, such as scale economies or technical complementarities, reinforce the original decision and lead to a ‘lock-in’, even if certain solutions turn out to be less efficient than others (Pierson 2000, 251–3).

Path dependency was first studied in the context of technical innovations, the QWERTY keyboard being a very prominent example (David 1985). Due to the characteristics of collective action problems, it was later argued, path-dependent processes are very likely to occur in the realm of politics (Pierson 2000, 257). More recently, the concept of path dependency has also been applied in studying law (for instance, Fon et al. 2005). The focus here is par-ticularly on precedent, which plays a special role in legal reasoning. It is by honouring precedent, by deciding new cases along the lines of existing judge-ments, that courts differ from arbitrary political actors (Gerhardt 2005, 909):

Legal institutions are path dependent to the extent that how litigation and judicial rule-making proceeds, in any given area of the law at any given point in time, is fundamentally conditioned by how earlier legal disputes in that area of the law have been sequenced and resolved. (Stone Sweet 2002, 113)


‘Fundamentally conditioned’, however, is not synonymous with ‘deter-mined’. Precedent limits the range of permissible legal arguments, but it does not bind courts to the extent that they may not pursue other lines of reasoning, as common deviations from established case law illustrate (McCown 2003, 979).

Precedence as such is therefore insufficient as an argument for path dependency. In addition, we need to identify positive feedbacks which reinforce the effect of existing case law and foreclose alternative paths. Above all, precedent encourages private and supranational litigants to pur-sue certain legal claims rather than others. Litigation thus creates posi-tive feedback effects when established legal claims are brought to bear on novel areas (Schmidt 2010).1 Moreover, the difficulties faced by attempts to politically reverse international jurisprudence have already been men-tioned above. The next section addresses the jurisprudence of the ECJ on the free movement of goods, services and persons. We illustrate how, once established, legal interpretations may get locked in and, ultimately, become politically inefficient. The chapter concludes with two comparative case studies on the preconditions and limitations of path-dependent legal internationalization.

Free movement of goods, services and persons in the EU

The provisions for the free movement of goods, services and persons – the latter encompassing the free movement of labour and of establishment – are cornerstones of the Treaty of Rome and of European integration.2 The internal market, as the major area of integration, builds on these provisions. As in other free trade areas, these freedoms were formulated and originally interpreted as anti-discrimination measures. As a precondition for trade, member states could demand that persons pursuing economic activity hon-our their domestic market regulations. Once this was the case, they could not discriminate against them.

The ECJ changed this interpretation of the market freedoms in the famous cases of Dassonville (Case C-8/74) and Cassis de Dijon (Case C-129/78) in the 1970s. Here it argued that national regulatory obligations could be treated as quantitative restrictions to trade. Ever since then, when deciding about mar-ket access, member states have to take into account the regulatory restrictions of the respective home country, which as a rule have to be mutually recog-nized. If member states want to impose additional regulatory burdens, they are required to prove their proportionality. Private actors received much greater economic leeway with this interpretation of the freedom of goods. They were now able to export products, legally marketed or produced in any member state, to all other member states. Thus, by interpreting the free movement of goods as a duty of mutual recognition, the ECJ established a very different ‘path’ than would have resulted from the mere obligation not to discriminate.


Given that trade relations in the European Community in the early years were primarily about the trade of goods, the shift from non-discrimination to the removal of restrictions was first established in this area. In the 1970s, in a community of nine member states with comparable economic develop-ment, member states could assume an equivalent level of market regulation and control. By implicitly agreeing to mutual recognition, they forewent regulatory power for trade facilitation (McCall Smith 2000). At the same time, they could try to argue for overriding public interests in cases where they wanted to maintain their regulatory restrictions – for environmental reasons, for instance.

But why did the interpretation of the other freedoms also gradually follow this path? For private actors, first of all, a comparable interpreta-tion of the other freedoms gives them much greater leeway to pursue their economic activities. Once such a path is established, significant incentives exist to litigate in order to transfer the new interpretation to other freedoms. Private actors have indirect access to the ECJ via domes-tic courts, which request a preliminary ruling of the ECJ when in doubt about the applicability of EU law. By arguing in favour of an interpreta-tion of other freedoms in parallel with the freedom of goods, private litigants provide positive feedback that strengthens the path dependency of the case law.

An example from the freedom of services shows the underlying mechanism. One of the first relevant judgements transferring the reasoning of Cassis to services is Säger (Case C-76/90). Here a German court asked whether the services freedom applied to a case in which a patent-renewal alert service, established in the United Kingdom, offered its services in Germany, where this type of service required a special license. The Court argued fully in paral-lel to the freedom of goods:

Article 59 of the Treaty requires not only the elimination of all discrimination against a person providing services on the grounds of his nationality, but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, when it is liable to prohibit or otherwise impede the activities of a provider of services established in another Member State where he lawfully provides similar services. (Summary, No. 1)

By granting additional rights, the ECJ motivates other actors to also turn to the courts to extend their economic rights by taking the route of EU law. Another central case, Gebhard (Case C-55/94), may serve as a further example. In this case, a German lawyer was practising in Italy, though not a member of the Milan Bar. The case concerned the distinction of the freedom of ser-vices from the freedom of establishment. Under the freedom of services, which also covers temporary activities, Mr Gebhard could have practised in


Italy in this way, while under the freedom of establishment he needed to comply with Italian regulations. However, the Court stated that also under the freedom of establishment, a member state might only impose regula-tions on nationals from other member states if these regulations fulfilled four conditions:

They must be applied in a non-discriminatory manner; they must be jus-tified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it. (No. 37 of C-55/94)

Thus the freedom of establishment, too, is not only a right to non- discriminatory treatment but implies that member states may only impose necessary and proportionate regulatory requirements. Given the breadth of case law, numerous examples could be mentioned which show the same pattern. But are there also counterexamples in which the ECJ has deviated from or even reversed its general line of reasoning? These cases could help to specify what supports the path dependency of case law and where it meets its limits. For several decades, the Court’s jurisprudence on the free movement of capital differed from the other freedoms; we will address this theme in more detail in the next section. A notable example from the area of the freedom of goods is the Keck ruling (Cases C-267/91 and C-268/91), where the ECJ exempted selling arrangements from the reach of the freedom of goods as it had become concerned with too many cases aiming to use EU law as a lever for purely domestic reforms (Rawlings 1993). The Keck ruling shows that judges are, in principle, relatively free to break away from an existing path of interpretation and start new lines of reasoning.

Nevertheless, regular deviations from or re-interpretations of existing case law could soon undermine legal certainty. The particular importance of legal coherence and certainty is reflected upon by Advocate General Maduro in his opinion on two preliminary references from Italy (Cases C-94/04 and C-202/04). The ‘appearance of new factors’, Maduro concedes, ‘may justify adaptation or even review of [. . .] case-law’, and he mentions the Keck ruling as the most salient example. In the cases at hand, however, he rejects any such ‘adaptation’ by arguing:

The force awarded by the Court to judgments it has delivered in the past may be considered to derive from the need to secure the values of cohe-sion, uniformity and legal certainty inherent in any system of law. Those values are all the more important within the context of a decentralised system of applying the law such as that of the Community legal system. (No. 27-30, C-94/04 and C-202/04)


Hence, as a consequence of Europe’s decentralized judicial system, precedent plays a particularly important role for the reasoning of ECJ judges. Deviant landmark cases such as Keck are rare, and exceptional approvals of mem-ber state restrictions of EU fundamental freedoms are sometimes surpris-ing (Voßkuhle 2009, 19–21), although compatible with existing case law. Generally, the Court interprets such permissible restrictions narrowly while arguing in favour of a broad impact of EU fundamental freedoms (Oliver and Roth 2004, 416).

Moreover, private litigants will only support paths that are likely to enhance their rights – thus there is an incentive to take to court cases which may profit from an extensive interpretation of the basic freedoms, but not those that restrict their scope. For example, tax litigation before the ECJ inherently tends to reduce national tax revenue, as litigants will normally go to court only if they expect to benefit in terms of lower tax bills (Genschel and Jachtenfuchs 2011, 303). A judgement like Keck is therefore unlikely to motivate much litigant behaviour; it is rather in defence of national regula-tory competence that actors may recur to it. Thus, when establishing new legal paths, the Court will sometimes be supported by litigants, and this kind of support is not unimportant for the Court. It shows that there is a positive response to the individual rights it has itself created, thus fostering its own legitimacy (Kelemen 2006, 123).

But it is not only litigants who create such positive feedback to legal inter-pretations introduced in one field and subsequently transferred to others. In addition, the coherence of case law is more easily safeguarded if the interpre-tation of the basic freedoms follows a similar logic, as often more than one freedom is relevant in a case. The example of the German lawyer Gebhard practising in Italy (cited above) illustrates this, simultaneously involving the freedoms of services and of establishment. If different freedoms are inter-preted in different ways, it is much more difficult to attain coherent case law (Schmidt 2010, 464).

Path-dependent processes, however, not only exhibit positive feedback but are also difficult to interrupt and often result in inefficient outcomes. For governments, as we already argued above, it is hardly possible to change the Treaty or to jointly correct contentious ECJ rulings due to the unanimity requirement. But to what extent does the established path of ECJ jurisprudence result in inefficiency as implied by the idea of a ‘lock-in’? In purely economic terms, the extension of fundamental freedoms is justi-fied by improved efficiency (Pelkmans 2007, 710). However, while in the EU integration largely builds on the economy, the accompanying federal political union has to be constructed such that legitimacy is adequately ensured. Path-dependent jurisprudence therefore may be considered politi-cally inefficient if it overstretches the Court’s legitimacy. Whether the ECJ’s jurisprudence is still legitimate is a matter of intense debate and cannot be decided here, but some prominent critics have answered the question


negatively in recent years (Herzog and Gerken 2008; Scharpf 2009). On the whole, European integration is regarded as legitimate mainly with regard to regulatory policies, which it predominantly pursues, but less in terms of redistributive policies (Majone 1996). This is so because the underlying iden-tity has so far not been sufficient to provide enough solidarity to legitimate more far-reaching redistribution (Haltern 2005, 97; Scharpf 2009).

A cursory reference to the different fundamental freedoms, however, shows that the problem of transferring the reasoning of Cassis to the other freedoms lies in the very different degrees of redistribution they imply. Mutual recognition in the area of free movement of goods raises much fewer redistributive issues than the three other areas. The problems resulting from the extensive inter-pretation of the fundamental freedoms can be highly contentious politically, which became apparent in the discussion over the Services Directive (Directive 2006/123/EC). In the original proposal, the Commission largely sought to cod-ify its interpretation of ECJ case law concerning the free movement of services. In many ways, the rights to market access for service providers acknowledged in the Directive could be deduced from established ECJ case law. A codification promised a less complicated and more consistent application of these rights, as it would give service providers the opportunity to refer to secondary law rather than just to case law. Also, the revised and adopted Services Directive had to follow case law, as secondary law cannot contradict primary law. But why is a Cassis-like interpretation of the freedom to provide services politically more contentious than for goods? As service providers normally have to be locally available for service provision, the home country rule implies that differently regulated providers may work side by side. While the mutual recognition of goods regulation also implies that, for instance, beer conforming to purity standards can be sold alongside beer including additives, it constitutes direct competition between differently regulated goods that in turn meet different consumer demands, while the producers are subject to the national regula-tions of their home country (Schmidt 2009, 860–1). The case is similar to the freedom of establishment: Here the right to freely pick a location for a business in any of the member states results in numerous arbitrage possibilities on taxes and company law restrictions (Genschel and Jachtenfuchs 2011, 302). Finally, for the free mobility of labour and union citizenship, an extensive interpreta-tion implies that, for instance, Austria may not restrict access of Germans to study medicine, or that member states will have to pay welfare benefits to citizens of other member states who have never contributed to the costs by paying taxes in the country in which they now claim a benefit.

To summarize, positive feedbacks lead to a transfer of legal solutions from the path chosen for the freedom of goods to the other fundamental free-doms. The extent to which this transfer raises redistributive issues shows that a similar legal interpretation would not have been established had there not been the example of ‘coincidental’ goods for which the legal reasoning was first established. As this path dependency cannot easily be interrupted


and raises significant distributional issues, it may be regarded as inefficient in a political sense. We shall now turn to the free movement of capital, which we have not dealt with so far, to see whether it has been possible to establish a similar path here as well. After that, we will turn to the WTO as another regime that is similar in character to the European free trade regime.

Comparison I: Free movement of capital in the EU

Apart from goods, services and persons, the Treaty on the Functioning of the European Union establishes a fourth fundamental freedom: the free movement of capital (and payments). Before the Maastricht Treaty reform, the movement of capital in Europe remained restricted and member states largely controlled the pace of integration. Afterwards, once the ECJ had established direct applicability of the new Treaty rules, the jurisprudence on capital movement rapidly converged with the other freedoms. Thus the free movement of capital is an instructive case for investigating the limits and preconditions of ECJ-driven integration through law.

Before 1990, when the Economic and Monetary Union (EMU) entered its first phase, capital movements in Europe were only partly liberalized. The fourth Treaty freedom was regarded as the ‘poor relation to the other three’ (Barnard 2004, 461). Without closer coordination and the eventual integra-tion of monetary policies, member states were afraid of undermining their own monetary policies by loosening the control of capital flows (Hindelang 2009, 34). Even the Commission acknowledged the particular sensitivity of capital markets and supported protective measures against speculative capi-tal movements in the 1970s. In one of its earliest judgements on the free movement of capital in 1981, the ECJ concluded that, in contrast to the other fundamental freedoms, the relevant Treaty provision was not directly effective (Casati, Case C-203/80). Subsequently, there were only a few occa-sions on which the Court could touch upon the free movement of capital (Figure 6.1), and member states decided on all steps towards the integra-tion of capital markets. Most importantly, in 1988 the Council adopted the Capital Movements Directive (Directive 88/361/EEC), which aimed at a comprehensive liberalization of capital movements and entered into force in 1990.

The willingness of member state governments to push forward the liberalization of capital markets in Europe by the end of the 1980s was closely linked to the EMU project (Hindelang 2009, 35–6). The Capital Movements Directive therefore obliged member states ‘to abolish restrictions on movement of capital’, and it included in its Annex I a broad typology of capital movements covered by these rules, the so-called nomenclature. As a next step, the Maastricht Treaty fundamentally altered the primary rules on the free movement of capital and payments as of 1 January 1994. When designing the Maastricht rules on capital movement, the heads of state had


the unique opportunity to learn from their experience with other market free-doms (Peers 2002, 335). The rules on free movement of capital and payments were brought together in one Treaty chapter, largely reproducing the main provisions of the Capital Movements Directive, and Art. 56 prohibited all restrictions on the free movement of capital and payments among member states as well as between member states and third countries (Toth 2005, 358). Even though the Directive lost its independent legal force, it was still con-sidered to be the main source for interpreting the Treaty provisions. Given that no definition of capital movement was established, the Directive’s nomenclature kept its guiding role for identifying the scope of European rules. Most importantly, member states introduced a novel exemption clause to Art. 58(1)(a) EC, allowing tax discrimination between residents and non-residents. This provision clearly reflected member states’ concerns about potential judicial intervention into a politically sensitive area of national sovereignty (Peers 2002, 348).3 In terms of integration, the clause even constituted a step backwards from the Directive (Kiemel 2003, 1775; Bröhmer 2007, 866).

Until 1994, when the new Treaty rules came into effect, the integration of capital movements followed a singular historical path: Integration proceeded only slowly and was controlled by member state governments; secondary legislation preceded the Maastricht Treaty reform. Since 1994, however, the integration of capital markets has clearly accelerated, and the pattern of

15

10

5

01980 1985 1990 1995 2000 2005

Figure 6.1 ECJ judgements on the free movement of capitalSource: EUR-Lex.


integration resembles more closely the one outlined in previous sections, underlining the importance of court activism. Most conspicuously, the num-ber of ECJ judgements interpreting the Treaty provisions on free movement of capital has risen dramatically from no or one case per year to 19 cases in 2009 (Figure 6.1). The judgements touch upon three broader issues: restric-tions on investments in real estate for non-residents, special rights of public authorities in former public enterprises (so-called ‘golden shares’) and – most importantly – the field of taxation.

How did this development come about? As early as 1995 – shortly after the new Maastricht rules had come into force, though dealing with a case predating the Treaty reform – the ECJ found Art. 1 of the Capital Movements Directive precise enough to be directly applicable (No. 33 of Joined Cases C-358/93 and C-416/93). Moreover, by incorporating the same provision into the Maastricht Treaty, member states had made this development ‘practically irreversible’ (Kiemel 2003, 1745). Shortly thereafter, the Court also established its authority to fix the scope of the provisions on capital movement. The nomenclature in Annex I of the Directive, it ruled in 1999, ‘still has the same indicative value, for the purposes of defining the notion of capital movements [. . .] subject to the qualification, contained in the intro-duction to the nomenclature, that the list set out therein is not exhaustive’ (No. 21 of Case C-222/97, emphasis added). For example, in its judgement on Verkooijen (Case C-35/98), the Court ruled that the receipt of dividends from a foreign country fell under the provisions of the free movement of capital despite its omission from the nomenclature.

The latter case is even more noteworthy for its interpretation of Art. 58(1)(a) EC, which under certain conditions allows for tax provisions distinguish-ing between resident and non-resident taxpayers. Despite the fact that this explicit exception had been newly introduced into the Treaty rules, the Court ruled that Art. 58(1)(a) did not go beyond what had already been implied in the Directive and what corresponded to its own interpretation of the other freedoms of persons, establishment and services (No. 43 of Case C-35/98). As a result, the Treaty exception has not been applied so far, and cases for which Art. 58(1)(a) might have been relevant have been treated under the rules governing the freedom of services (Barnard 2004, 477, footnote 122). Peers (2002, 349) critically concludes on the Verkooijen judgement:

While such an interpretation secures a uniform application of the Treaty freedoms as regards tax exceptions, it appears to flaunt the deliberate intentions of Treaty drafters. Thus the Court has achieved the goal of securing a coherent interpretation of the freedoms at the cost of ignor-ing the wording of the Treaty. As a result, any moves to adopt secondary legislation in this area will be undertaken under the shadow of the Court’s jurisprudence on the primary Treaty rights, removing a great degree of discretion from national and Community legislators.


This citation already indicates a major motivation behind the ECJ’s juris-prudence on free movement of capital since 1994, namely, to integrate the fourth freedom more systematically into the Court doctrine on European fundamental freedoms. First of all, the Court interprets the term ‘ restriction’ broadly and uses similar language to that used in the context of the other freedoms when identifying the relevant threshold. For example, in the first golden shares case, Portugal was found to violate European law because domestic rules – though non-discriminatory – were ‘liable to impede’ the acquisition of shares in an enterprise and therefore had the potential ‘to dissuade investors’ from other member states (No. 45 in Case C-367/98).4 Based on this judgement, any national regulation which potentially makes an investment less attractive may be called into question under the rules on free movement of capital (Grundmann and Möslein 2003, 330–1). The redistributive consequences of some ECJ rulings, and hence their tenuous political legitimacy, are particularly manifest in taxation. Thus, in 2009, the ECJ even ruled against the opinions of governments from Germany, France, the United Kingdom, Ireland, Spain and Greece that donations to charita-ble bodies were covered by the rules on free movement of capital and that national legislation may not restrict tax deductions for such donations to domestic bodies, because this would render donations to foreign bodies less attractive (Persche, Case C-318/07).

As regards justifiable exceptions from the free movement of capital, the Court has developed a twofold approach which largely corresponds to the other freedoms, in particular to the Cassis and Dassonville jurisprudence on the free movement of goods (for instance, in Konle, Case C-302/97; see Kiemel 2003, 1736, 1773). Accordingly, exceptions can either be justified with regard to ‘mandatory requirements of general interests’ or on the basis of one of the explicit derogations in Art. 58 EC. In order to justify excep-tions, member state governments have to show that national measures are suitable, necessary and proportionate, thus following the Gebhard test scheme which was transferred by the ECJ from the freedom of establish-ment (Barnard 2004, 472). Ironically, member state governments tend to even reinforce this convergence if they want to successfully justify excep-tions from the free movement of capital. The French government, while generally opposing the European Commission’s application of free move-ment of capital rules to golden shares cases, justified its own rules with regard to mandatory requirements of general interest to be on the safe side; the Court approved the grounds submitted by the French but rejected the concrete measure as disproportionate (Case C-483/99; Lippert 2009, 344). On the other hand, the Court did not even consider other justifications for golden shares forwarded by several member states, as these would have diverged from the system of exceptions customary to the other freedoms (Grundmann and Möslein 2003, 338–9). The parallel interpretation of dif-ferent Treaty freedoms was particularly emphasized by Advocate General


Colomer in the German Volkswagen case. In his view, the Commission had wrongly challenged Germany over an infringement of the free move-ment of capital rather than the freedom of establishment, but, as Colomer concluded:

In any event, I see no point in delving any deeper into an incorrect legal classification of the alleged infringement, which is of no great conse-quence, since the Court of Justice subjects both Community freedoms to similar scrutiny. (No. 60 in Case C-112/06)

To summarize, the jurisprudence on free movement of capital thus converges with the other freedoms; for all practical purposes, differences between free-doms have diminished in importance over time (Barnard 2004, 481–2). Although member states, having experienced the legal interpretation of the other freedoms, tried to restrain the Court with respect to the free movement of capital, once the direct effect was established by the Maastricht Treaty, case law developed very much in parallel to the other freedoms. Safeguards put in place by the member states did not function as expected.

Comparison II: Free trade in the WTO

The WTO appears to be a suitable case for comparison with the development of legal integration in the EU. Both entities aim at striking down national barriers to trade, focusing on similar economic freedoms; the rules of the WTO’s predecessor, the GATT, served as a blueprint for the EEC Treaty of 1957. Also, the WTO’s development and the regulatory shifts that have taken place there are reminiscent of the EU’s development in many respects (De Búrca and Scott 2001, 2). However, we argue that a court-driven transfor-mation of the WTO, similar to that in the EU, can only partly be expected. Because private actors do not have access to WTO dispute settlement, and because of the limited amount of case law (at least in comparison to the EU), the preconditions for path-dependent jurisprudence do not exist to a simi-lar degree. As a result, differences between jurisprudence in the EU and the WTO in terms of their expansiveness cannot be explained with differences in the law per se.

By setting up the WTO, its member states established, first and foremost, a strong international judiciary, consisting of a standing Appellate Body and panels that are set up on a case-by-case basis.5 This judiciary has since played an important role not only in eliminating national trade barriers, but also as an important modifier of the international trade law system (Cass 2001). Its ability to do so is, as in the EU, attributable mainly to aspects of its insti-tutional design and legal reasoning. First, the WTO’s Dispute Settlement Understanding (DSU) grants adjudicative authority to the panels and the


Appellate Body by directing the Dispute Settlement Body (DSB) to adopt reports unless there is a consensus against their adoption (Arts. 16.4, 17.4). Together with the compulsory nature of the panels’ and the Appellate Body’s jurisdiction, this negative consensus rule guarantees the effectiveness of the bodies’ judgements. Second, WTO members institutionally accorded a con-siderable amount of independence to the WTO judiciary in order to protect judicial proceedings from undue governmental interference (Charnovitz 2002, 230). Third, and maybe most importantly, ‘legislative counterbalanc-ing’ has become more difficult in the WTO, as the heterogeneity of interests has become more pronounced. As in the EU, changing WTO law is hampered by WTO members’ continued adherence to relatively demanding decision-making rules (Ehlermann 2002b, 302).

These institutional aspects of the WTO judiciary’s ‘relative judicial power’ (Broude 2004) are complemented by other factors strengthening the position of WTO panels and the Appellate Body. Like any treaty, the WTO agreements are only incomplete contracts, with gaps that have to be filled by judicial interpretation. As we know not only from the EU, this easily raises concerns about judicial activism or undue behaviour of the ‘agent’. Moreover, as in any legal order, judicial proceedings in the WTO are expected to ensure ‘the coherence of the litigation environment, thus reducing randomness’ (Stone Sweet 2004, 33) by providing legal security and predictability. Although not foreseen de jure in the WTO agreements, precedential effects of Appellate Body reports have been substantiated in empirical analyses (Bhala 1999; Trachtman 1999) and confirmed by practitioners (Ehlermann 2002a; inter-view, 11 December 2009, Brussels).

The Appellate Body in particular has an important role to play in defin-ing a large part of the WTO’s rules. The fact that it is particularly strong in relation to political decision-making in the WTO leaves the Appellate Body to define under which circumstances national trade restrictions may be regarded as legitimate – and in doing so, ‘the AB enjoys considerable creative room for manoeuvre’ (Scott 2004, 311).

How has this room for manoeuvre been used? For the sake of brevity, only two instances will be referred to here. First, in US – Shrimp (1998, WT/DS58/AB/R) and later in EC – Asbestos (2001, WT/DS135/AB/R), the Appellate Body decided to open WTO dispute settlement proceedings to unsolicited amicus curiae briefs, ‘despite the clear disapproval of this course by many WTO gov-ernments’ (Charnovitz 2002, 236; Mavroidis 2002). Member state ‘objections ranged from total opposition to the argument that the amicus curiae issue is a matter to be decided by the Members, and that the Appellate Body had transgressed the boundaries of its competences’ (Ehlermann 2002b, 303). Second, the panel’s report in Australia – Automotive Leather II – Recourse to Art. 21.5 of the DSU (2000, WT/DS126/RW) sparked vociferous protest not only from the party losing the case at hand (Australia), but even from the winning


party (the United States) and other member states (Ehlermann 2003, 707). The panel had ordered Australia to retroactively retract a prohibited sub-sidy (reasoning with the principle of effet utile) and, by doing so, even went beyond the US claim. By violating the rule of non ultra petita (an adjudicatory body may not decide more than it has been asked), the panel’s approach ‘caused quite a commotion’ among WTO members (Bourgeois 2001, 154). In the end, neither Australia nor the United States appealed, reaching an out-of-courtroom settlement instead.

The judicial decisions in these cases provoked criticism from many mem-ber states, and more rulings may be cited – for instance, the Appellate Body’s reports in India – Quantitative Restrictions (1999, WT/DS90/AB/R), Argentina – Footwear (EC) (1999, WT/DS121/AB/R) or US – Lamb (2001, WT/DS177, 178/AB/R) – where the WTO judiciary subsequently had to face allegations of having overstepped its mandate (Roessler 2000; Ehlermann 2002b, 302–3; Alter 2008, 49). Yet political responses failed to materialize: As no consensus could be reached to block the Appellate Body’s decision to accept unsolic-ited amicus curiae briefs, the report was passed and became binding; as the panel decision in Australia – Automotive Leather was not appealed, it stands adopted – although its effect was limited due to the out-of-courtroom settle-ment between Australia and the United States.

It seems reasonable to attribute the lack of political responses to judicial decision-making to institutional factors reminiscent of those in the EU. Most importantly, the joint-decision trap seems to work even more strongly in an organization with a larger and more heterogeneous membership than in Europe. Accordingly, one might surmise that instances are rather frequent in which the WTO judiciary autonomously develops WTO law that goes beyond the will of the member states. This does not seem to be the case, however. The vast majority of panel and Appellate Body reports are adopted relatively smoothly, without provoking harsh reactions from a large number of member states. As the examples show, although it could move the law beyond what was delegated to the judiciary by WTO members, the WTO judiciary appears to stay rather deferential to the will of national actors, at least most of the time. Recalling the cases touched upon above, and notwith-standing its self-proclaimed right to take into account unsolicited amicus curiae briefs, the Appellate Body has not yet done so;6 similarly, the precedent of the panel’s effet utile reasoning in Australia – Automotive Leather, which went beyond the claim of the disputing parties, has never been taken up (Vermulst and Graafsma 2005, 346). Thus these cases did not lead into path dependencies in subsequent judgements. Notwithstanding the apparent dif-ficulties faced by member states in their attempts to correct judicial decisions ex post, the WTO judiciary defers to some extent to the pre-eminence of member states’ political decision-making, especially in disputes that touch upon highly salient political issues (Kelemen 2001, 648). WTO members who criticized panel and Appellate Body decisions were successful to the extent


that the ‘precedent’ initially set was not taken up in subsequent reports by other panels or the Appellate Body.

Which aspects of judicial decision-making in the WTO help explain this outcome? First, and unlike in the EU, there are far fewer ‘interlocutors’ (Weiler 1994) that might help the panels and the Appellate Body to mod-ify the WTO’s legal system. The access of private parties to WTO dispute settlement proceedings is restricted to lobbying national governments or the European Commission in the EU. In fact, the row that followed the Appellate Body’s amicus curiae decision can easily be interpreted as a move by member states to protect their exclusive access to the WTO’s court-rooms. WTO law enjoys ‘direct effect’ in hardly any national legal order (Bronckers 2008). Not even the EU – an actor that generally welcomes a further strengthening of the WTO’s rules-based system – has any inten-tion to change this (interview, 9 December 2009, Brussels). Moreover, an equivalent to the preliminary reference procedure (Art. 234 EC) does not exist in the WTO (Stone Sweet 2004, 21). As member states control access to WTO dispute settlement procedures, they can also bypass them should they be too dissatisfied with the judicial outcomes. Also, non-compliance with panel or Appellate Body reports remains an option of last resort for member states, although it has rarely been used openly in the past (Princen 2004, 568–70).

Second, shifting our perspective from the principal to the agent, the members of the Appellate Body in particular highlight the ‘common goal’ of strengthening the WTO and not weakening it by provoking anger among member states (interview, 8 December 2009, Brussels). The principle of col-legiality stipulated in the Appellate Body’s working procedures (Art. 4) serves to avoid individual activism and furthers median positions by demanding frequent inter-member exchange (Art. 4). Although the situation might be different for panellists – they are appointed ad hoc and are not as known for their high integrity and professional reputation as are Appellate Body members – most of them consider themselves to be part of the ‘Geneva family’ (interview, 9 December 2009, Brussels). Taking into account that member states have a strong say in nominating individuals to the panels, the latter’s members, too, seem to be responsive to the concerns and reac-tions of member states.

To conclude, the WTO’s institutional setting makes a development of legal reasoning similar to the EU likely. In fact, the incompleteness of the underly-ing contract(s) has given rise to panel and Appellate Body reports that have provoked member states’ fierce opposition. However, in contrast to the EU, this has not led to a comparable expansionist case law development. With member states controlling access to the WTO judiciary, private litigants can-not provide positive feedback. Moreover, as member states can bypass the WTO forum, its judiciary is well aware of the potential consequences of con-tentious decisions.


Conclusion

At the international level, the balance of power between the judiciary and the legislature is unlike the one that obtains at the national level. While domestic courts, too, are bodies with major decision-making powers to which contentious decisions are often delegated, this is even more so at the international level (Maduro 2007). The degree of vagueness of the underly-ing rules notwithstanding, courts have to decide if called upon. In setting case law, courts enjoy a greater measure of discretion than legislative bodies at the international level, because the courts’ principals can legislate only by qualified majority or even unanimous vote.

In the EU, the ECJ has been decisive for interpreting the fundamental freedoms in a way that significantly increased the economic options avail-able to private actors. By using their rights of free movement and addressing their domestic courts in suing against regulatory hindrances, private actors have provided positive feedback to an extensive legal interpretation. For the ECJ, and also for the Commission, this support is crucial for legitimating their quest to strengthen integration through an extensive interpretation of European law. As economic exchange develops, cases referred to the ECJ are more likely to involve more than one of the freedoms. Legal consistency and predictability are more easily secured when legal arguments on the different freedoms run in parallel.

Whereas home country regulation is largely accepted for the trade of goods, the Services Directive has clearly shown that going beyond goods is more politically contentious if economic actors can operate under their home country rule in other member states. Judgements such as Laval (Case C-341/05) and Viking (Case C-438/05) have shown that legal rulings which prioritize trade facilitation to such a great extent even hamper fundamental rights such as the freedom to strike (Joerges and Rödl 2009). For the member states, however, it is difficult to control ECJ case law, as private actors have independent access and preliminary rulings imply that there is an integrated court system in the EU, involving the ECJ side by side with the national courts.

The free movement of capital, which originally lacked direct effect, shows very clearly the limitations that member states face when they try to con-tain the development of case law. By adopting the Capital Movements Directive and incorporating its main provisions in the Maastricht Treaty, the member states themselves initiated the liberalization of capital markets in the context of the EMU, but the ECJ soon relied on its supreme authority to interpret the Treaty rules. Member state efforts to impose ex ante limits on court activism have proven rather toothless, and any attempt to correct the judiciary ex post seems futile given the high consensus requirements for Treaty reform. Against this background, the Court has been able to autonomously promote integration by moving its interpretation of the free


movement of capital closer to its established jurisprudence on the other fundamental freedoms.

In many respects the regulatory shift in the WTO and its consequences remind us of the EU’s development. This is another story of an international judiciary changing the legal obligations of the organization’s member states and, in parallel, extending its own remit. However, the potential of the WTO judiciary to make law autonomously is more limited than that of the EU. This is so because private actors have no independent access to the judici-ary. As member states have to consent to the WTO judiciary’s settlement of a conflict that involves them, they can opt for bilateral agreements when they feel that case law develops in ways that diverge from their own under-standing of the WTO Treaty. This is a powerful safeguard against a judiciary becoming too independent. The WTO’s judges have therefore been careful not to issue overly contentious rulings – and that provides a strong contrast to their counterparts at the European level.

Notes

1 In neofunctionalist terms, one might describe this as a process of legal ‘ spillover’. In at least two respects, however, our path dependency argument deviates from traditional neofunctionalist accounts of ECJ jurisprudence. First, rather than assuming an inherent ‘self-interest of judges, lawyers, and professors’ in expan-sionist jurisprudence (Burley and Mattli 1993, 60), we focus on the role of private and supranational litigants as the driving forces in this process. Second, whereas coherence and uniform interpretation are certainly important for the functioning of the legal order, we stress the potential political inefficiencies of path-dependent jurisprudence and thus challenge the neofunctionalist argument that legal expan-sionism may be accompanied by a ‘similar level of effectiveness in the broader spheres of economic, social, and political integration’ (Burley and Mattli 1993, 73).

2 The free movement of capital is discussed in a separate section below.3 In fact, the incorporation of this exception into the Treaty was highly contested,

which only underlines how politically sensitive the area of taxation is. Initiated by some member states – like the United Kingdom, the Netherlands and Germany – that had advocated a far-reaching liberalization of capital movements (Hindelang 2009, 35–7), the Treaty was supplemented by a non-binding Declaration which confines the tax exception to discriminatory rules that already existed before the end of 1993 (Peers 2002, 335).

4 An identical formulation had been used for the free movement of services a decade earlier in Säger (No. 12 of Case C-76/90; see Barnard 2004, 470).

5 The WTO panels and the Appellate Body are, in strictly legal terms, ‘(quasi-)judici-ary’ only because the member states have to adopt the reports of the panels and the Appellate Body so that they can become binding.

6 See, for example, the Appellate Body’s approach in China – Auto Parts (2008): WT/DS339, 340, 342/AB/R, paragraph 11.

127

7Explaining the Transnationalization of Commercial LawGralf-Peter Calliess, Hermann B. Hoffmann and Jens Michael Lobschat

Commerce always needs to be institutionally embedded. In institutional economics, it is accepted that the exchange of goods and commodities can only take place when property rights are clearly defined and when enforceable, effective behavioural rules justify the expectation that contractual provisions will be mutually honoured (Richter and Furubotn 2003; Williamson 2005a; Hadfield 2008). For ordoliberals, these institutions are an essential part of every economic constitution and encapsulated in the term ‘transactional law’ (Böhm 1933; Behrens 2000).

While simple, step-by-step economic exchange can be safeguarded without much difficulty, exchange activities in more advanced, and hence complex, economic systems do not necessarily all occur at the same time or in the same place and therefore require more sophisticated, carefully devised safeguards. Numerous historical studies prove that societies have been able to safeguard their transfer orders for quite some time (Greif 1989a, 1989b, 2000, 2006; Milgrom et al. 1990; North 1991b). In the Middle Ages, for instance, the European mercantile community was able to formalize trade customs in the generally binding normative framework of the lex mercatoria, which was adjudicated by special mercantile courts. Here the enforcement of rulings was not based on the coercive force of still highly fragmented state authorities, but on the threat of social sanctions in the mercantile reputa-tional networks of guilds and fraternities – sanctions that went all the way to full-scale expulsion.

Only when the nation state emerged in the early modern period did the jurisdiction of civil courts that we are familiar with today begin to take shape. The young states deprived the mercantile courts of their power and brought commercial law under their control (Cutler 2003; Oldham 2004). On the one hand, this was motivated by the will to demonstrate and strengthen the state monopoly on the use of force. After all, one of the chief objec-tives fostered by the Enlightenment was the emergence of a civil society in which everyone had the right to pursue a trade regardless of social origin and to engage in economic exchange without the need for support from the

128 Explaining the Transnationalization of Commercial Law

exclusive corporative reputational network of the merchant class (Mertens 2010, 2011). On the other hand, the nationalization of commercial law was essential to meet the requirements of national mass markets, which were expanding rapidly in the wake of industrialization. The outdated mercantile reputational networks could no longer effectively sanction the vast numbers of anonymous actors that operated in national markets (Dietz 2009, 2014).

Since the early 20th century, moreover, the modern welfare state has fostered the substantive equality of its citizens through civil law, though initially only formal civic equality was sought (Canaris 2000). Today, instru-ments for the protection of the weak – especially the protection of tenants, consumers and employees – and judicial control of standard form contracts have largely eroded the social base for the ideal of private autonomy as it was propagated by Enlightenment thinkers.

Thus the ‘Golden Era’ of the welfare state was characterized by ideal-type economic exchange in domestic markets under the protective umbrella of the state private law regime; democratically legitimated statutes and their application by state courts protected all legally relevant issues that might affect ownership and enforced the fulfilment of contracts – if necessary through state compulsory enforcement measures.

Since the mid-20th century, however, trade has increasingly broken free from this nationally embedded institutional framework. With the lowering of political barriers to trade, especially the reduction of duties and tariffs, with the global linking of financial systems and with advances in transport and telecommunications technology, the volume of global cross-border exchange has grown exponentially. State institutions – that is, state law and state courts – increasingly struggle to keep pace with commerce and industry in the transnational realm. International private law and international civil procedural law are currently unable to safeguard economic exchange on the global markets (Schmidt-Trenz 1990; Streit and Mangels 1996; Rodrik 2000; Mertens 2011, 146–53), and national court decisions cannot presently be enforced elsewhere based on binding international law. Hence cross-border enforcement raises a plethora of practical issues (Hoffmann 2011, 101). The congruence of economic and legal space has been lost as a consequence (Zürn 1998).

Rather, we observe a kind of self-help movement by merchants in cross-border trade. Referred to as the ‘new lex mercatoria’, different industries have developed – in close parallel to the institutions that existed before the nationalization of commercial law – substantive behavioural rules and also reputation-based law enforcement instruments (Ellickson 1991; Schmidt-Trenz and Schmidtchen 1991; Streit and Mangels 1996; Dixit 2004; Teubner 2004; Williamson 2005a; Hadfield 2008). As globalization unfolded, private forms of governance – like relational contracts and reputational networks – came to prevail over state-organized systems of private law. The sheet anchor of the ‘shadow of the law’ (Dixit 2004) that still is the ultimate

Gralf-Peter Calliess, Hermann B. Hoffmann and Jens Michael Lobschat 129

resort for the private governance of domestic trade (Macaulay 1963; Macneil 1978; Ellickson 1991) is completely missing at the global level.

This trajectory and the revival of relational contracts are, for instance, apparent in software development (Dietz 2009, 2014; Dietz and Nieswandt 2009) and international timber trade (Konradi 2009). These examples also highlight the role that internationally operating law firms play in arbitration procedures, which have replaced state institutions (Sosa 2009). Extant research, including our own, has shown the simultane-ous internationalization and privatization of institutions that safeguard economic exchange – a development that we call the ‘transnationalization of commercial law’ (Calliess et al. 2007).

This transnationalization of commercial law – generating legal certainty for cross-border economic exchange – may be explained as a reaction of com-merce and industry to the normative void in cross-border legal interchange that is due to the limited territorial scope of the nation state and to the short-comings of binding international private and civil procedural law. However, an explanation that centres on the necessity of enabling cross-border eco-nomic exchange does not go deep enough. The really interesting question hiding here is: Why have nation states remained passive for decades and failed to establish a supranational system of private law, that is, an effective global private law system? Our explanation is based on three hypotheses:

• Hypothesis 1: From the business management standpoint of market par-ticipants, private governance mechanisms are an adequate means for safeguarding cross-border transactions. Commercial and industrial stake-holders therefore have no reason to push for a supranational (global) pri-vate law regime.

• Hypothesis 2: In the public debate, the problems in competition policy that private governance mechanisms pose and the corresponding advan-tages of a supranational private law regime often do not receive enough attention. Those who represent public interests do not push hard enough to supranationalize commercial law and to overcome the path depend-ency of national legal systems with the special interests they embody.

• Hypothesis 3: Private governance mechanisms can at least partly accom-modate the interests of the groups that they affect and, thus, function as social regulators. Private governance mechanisms therefore meet a minimum standard of participation and fairness, which again reduces the regulatory pressure on public actors.

Explaining the transnationalization of commercial law

The transnationalization of commercial law may be explained primarily by the fact that private governance mechanisms generate adequate levels of legal certainty for international trade, while commercial and industrial


stakeholders together with public actors do not exert sufficient pressure to constrain the impact of these private governance mechanisms through a supranational private law regime. In the following discussion, we first argue that rapid advancements in information and communication technology (ICT) have notably strengthened the effectiveness of reputation-based mechanisms – that is, relational contracts and reputational networks – in safeguarding cross-border transactions; this has made them the tool of choice, at least in the software industry. In a second step, we show that vertical integration in general and intra-firm trade in particular offer effective alternatives to market exchange; the representatives of public interests do not recognize the competition policy problems that come with their use, or they brush them aside. In the last two sections, we establish that private govern-ance mechanisms need not contradict public interests. Taking the example of maritime law, we show that private actors can establish a fair arrangement of legal rules by allowing the different stakeholders to participate in norm formation through a transparent procedure. Taking international arbitration as an additional example, we show that private governance mechanisms may – at least to some extent – serve as social regulators and, thus, generate a minimum standard of justice.

The revival of reputation: Enhancing the efficacy of private governance through information and communication technologies

In a study of cross-border contracts in the software development industry, Dietz and Nieswandt (2009) were able to confirm our first hypothesis. With the help of private governance mechanisms, they conclude, modern ICTs considerably facilitate the safeguarding of cross-border transactions and thereby reduce costs. As this provides market participants in the software industry with an economically viable solution for safeguarding their transac-tions, they see no need to exert pressure to establish a supranational private law regime.

As already mentioned at the outset, safeguarding transactions through relational contracts and reputational networks is hardly a new model. In fact, seen historically, these are the oldest means of safeguarding transactions, since they do not require a fully developed state apparatus but are a kind of self-help mechanism that market participants can generate themselves. Reputation-based governance mechanisms are also ideal for less-developed economies, since the initial fixed costs of establishing a reputational net-work are low. The network members themselves set, apply and enforce norms without the need to invest in further institutions (Dietz 2010, 47).

However, the running costs of reputational networks do pose a problem. In small networks, the costs of initiating and monitoring transactions are manageable, given that the members are likely to be in close personal contact with each other, but costs increase exponentially as network mem-bership increases, while the threat of exclusion from the group becomes less


and less credible (Dietz 2010, 48). As we have outlined, this is the reason why the nationalization of commercial law in the industrial age was a necessary precondition for rapid economic growth. While the dissemina-tion of information continued to function well in the exclusive network of overseas merchants, it was increasingly jeopardized as mass markets emerged in which countless anonymous actors interacted. Exclusion from a network lost its deterrent effect as a sanction because the introduction of the freedom of trade ushered in a new world of countless business contacts.

The paradigm shift towards a state-created private law regime with codified statutes, state courts and state enforcement measures entailed a cost structure that was totally different from the older ways of safeguarding contractual obligations through reputational networks. Now the fixed costs were high – as enormous investments in the establishment, equipment and maintenance of parliaments, courts and law schools became necessary – but the running costs decreased dramatically. In other words, once a state private law regime is established, the number of transactions it deals with turns into a comparatively negligible cost factor (Dietz 2010, 49). In this open system, efficiency is not diminished by an increase in the number of market partici-pants, quite in contrast to reputation-based private governance mechanisms.

Against the backdrop of emerging national mass markets, it therefore became necessary to establish state private law to prevent the costs of safe-guarding transactions from getting out of hand. So how do we explain the return to private governance mechanisms such as relational contracts and reputational networks to safeguard cross-border transactions in the age of globalization?

A partial answer to this question lies in the progress of modern ICTs. In a qualitative study using expert interviews to examine the safeguarding of software development contracts, Dietz and Nieswandt show that technologi-cal development significantly affects the choice of governance mechanisms (Dietz and Nieswandt 2009, 96–7; Dietz 2010, 171–80). Even if we take into account that the advantages of modern ICTs are more easily accessible to the software industry than, perhaps, to manufacturing, these findings still indi-cate that, by and large, such technologies reduce the cost disadvantages of private governance mechanisms and hence increase their efficiency among large geographically dispersed groups (Dietz 2010, 170).

Clients benefit from the cost efficiency of developments in ICTs from the moment a software development contract is made (Dietz 2009, 174–6). As a rule, internet research on the potential contractor is conducted prior to opening negotiations. Trustworthy suppliers are expected to list companies for which they worked in the past on their homepage. An intra-industry network provides access to further information about the competence and reliability of the potential business partner (Dietz 2010, 172). Also, it is com-mon business practice for the supplier to fill out a lengthy questionnaire electronically before the client inspects the site of the company.


In the contractual period, ICTs can enhance the effectiveness of relational contracts significantly (Dietz 2009, 176–8). For instance, to avoid one party having to make undue advance concessions and, thus, having to bear a disproportionate risk burden, software development contracts are often broken down into different stages, the so-called milestones. Payment is made for one predetermined stage of the project only, which is monitored and approved by the client. Here modern ICTs provide the opportunity to monitor the results achieved closely and at low cost, as any amount of data can be exchanged electronically, or video conferences be held, even over large dis-tances. The study documents the extreme case of a German client who could follow in real time what happened on the monitors of the developers at the supplier’s site in India (Dietz 2010, 175). ICTs, thus, blur the traditional dis-tinction between market and hierarchy that we find in institutional econom-ics. While software development contracts between independent companies are classic market transactions, the close monitoring possibilities that ICTs offer allow transactions to be steered in a way that, normally, is only possible in a hierarchically organized firm. The advantages of both classic institutions can, thus, be combined in one effective hybrid form.

Finally, modern ICTs also facilitate the enforcement of contractual claims through sanctions in reputational networks (Dietz 2009, 178–81). One can obtain and disseminate information quickly and cheaply over large dis-tances and among large groups through internet research and straightfor-ward (electronic) communication with third parties which the supplier of software suggests as referees (Dietz and Nieswandt 2009, 100). The reliability of the information provided by suppliers is also ensured through reputation, since industry insiders would immediately lose their standing as experts if they gave false testimonials.

In conclusion, then, our first hypothesis is supported by ample evidence. The possibilities provided by modern ICTs enhance the effectiveness of private governance mechanisms at all stages of a transaction. This also changes the cost structure of the governance mechanisms used. ICTs can restrain the – otherwise soaring – running costs of reputation-based governance in large groups. To be sure, it takes fixed costs to safeguard the transaction as, for example, questionnaires have to be developed that are employed to initiate contractual negotiations or as electronic systems have to be designed to monitor business partners in real time. However, once these investments have been made, further transactions hardly incur additional running costs. With the use of ICTs, the cost structures of private reputation-based governance mechanisms have become comparable to the cost structures of a state private law regime, which enables private govern-ance mechanisms to safeguard trade at the global level at a reasonable cost to individual actors (Dietz 2010, 180). Since market participants in the software industry recognize that the enforcement of formal contracts in state courts is, in fact, often impossible due to the shortcomings of international private


and civil procedural law already outlined, they are quite happy to safeguard their transactions through private governance mechanisms.

Securing transactions through vertical integration: Efficiency-oriented competition policy gives free rein to intra-firm trade

It is hardly surprising that private actors are content with well-functioning private governance mechanisms for safeguarding their cross-border transac-tions, but one might at least expect the representatives of public interests to criticize the absence of a practicable supranational private law. In particular, one might expect reservations based on violations of competition law, since reputation-based governance always builds on dependency and power.

How the transnationalization of commercial law affects global market structures and competition policy was studied by Mertens (2010, 2011). Contrary to our initial expectations, the representatives of public interests actually exert little pressure to supranationalize commercial law. This is so because modern competition policy, which is obsessed with microeconomic efficiency, endorses the safeguarding of transactions in dependent relation-ships, while it neglects prospective macroeconomic advantages of scale that a general private law regime would offer.

Mertens’ study (2011) builds on the theoretical perspective of an eco-nomic constitution that relies on ordoliberal principles. In this perspective, a market economy requires a constitution that facilitates free competition among anonymous market participants by establishing a legal framework for it (Böhm 1933, 1937, 1966). One aspect of this framework is transactional law, that is, the protection of property rights and the enforcement of con-tractual obligations through a state private law regime.

In a historical perspective, the nationalization of commercial law has established transactional law within the legal framework of national market economies. Mertens (2010, 2011, 70–82) found indications that, up to the early modern period, the codification of commercial law in Germany was also inspired by the wish to reduce restrictions of competition caused by per-sonal dependency. In the spirit of the Enlightenment, freedom of trade and (formally) equitable private law were supposed to disentangle economic rela-tionships from societal dependencies, guilds and fraternities, thus providing the institutional basis for the emerging national mass markets. Henceforth, with the help of a universal private law system, a public judicial system and a state enforcement apparatus, anonymous and (at least formally) equal actors could do business based on the principle of private autonomy with-out depending on relational contractual links or on a reputational network.

Against this backdrop, the revival, now on a global scale, of economic rela-tions in which transactions are safeguarded through personal and economic dependencies is remarkable. To enforce contracts without relying on state enforcement mechanisms, every step of a transaction is embedded in depend-ency relationships through private governance mechanisms. As a result,


we find a higher degree of vertical integration in global markets (Calliess and Mertens 2010; Mertens 2011, 163–80).

The most obvious example for such a development, and therefore the focus of Mertens’ study, is intra-firm trade. Without engaging in definitional intricacies, intra-firm trade may be broadly understood as the exchange of services or goods within a business entity – no matter whether the latter exists as one legal person or is organized as a corporate group. Although the exact extent of intra-firm trade is hard to measure (Dunning and Lundan 2008, 484), numerous studies indicate that it accounts for a significant part of world trade. For instance, between 1977 and 1994 intra-firm trade amounted to an estimated 40 per cent of total imports and 35 per cent of total exports in the United States (Zeile 1997, 23). Likewise it is estimated that about one-third of all cross-border transactions in services and goods are conducted as intra-firm trade within transnational corporations (Gilroy 1989, 327; Klau 1995, 15; Markusen 1995, 169; Eden 2001, 2). In some eco-nomic sectors, trade takes place almost exclusively in corporate structures. In 2002, for instance, American subsidiaries of German corporations conducted about 97 per cent of their imports and 82 per cent of their exports from and to Germany within the corporation itself (Matthes 2006, 9).

From the perspective of new institutional economics, intra-firm trade is a predictable reaction to the shortcomings of international private and civil procedural law. According to theoretical predictions by Coase and Williamson, a ‘make-or-buy decision’ will be made in favour of an intra-firm transaction if uncertainty on the free market is too high (Coase 1937, 1988; Williamson 1975, 1985). In other words: If, in the absence of an efficient international private law regime, legal uncertainty makes cross-border con-tracts with anonymous actors too risky, economic exchange will take place in structures of dependency and hierarchy, that is, via relational (bilateral or trilateral) contractual relations or via (unilateral) intra-firm trade. Hence intra-firm trade is an instrument that facilitates cross-border trade (Hennart 1982, 42, 2009; Dunning and Lundan 2008, 482; Mertens 2011, 101–7).

Modern competition policy also follows this insight. Since the 1970s, the so-called Chicago School has eclipsed the traditional Harvard School, which advocated free market structures (Posner 1976, 1979; Bork 1978). Whereas the original competition policy model found a concentration of private eco-nomic power undesirable, as it could not be reconciled with the principles of individual economic freedom (Edwards 1949, 91, 1956, 4; Mason 1957), the new Chicago approach was based on efficiency-oriented models. Since institutional economists consider it efficient to conduct transactions within a company under conditions of high uncertainty, the resulting concentra-tion of economic power is not seen as a problem for competition policy.

Today, the efficiency-oriented competition policy model also prevails in Europe. In particular since the early 2000s, competition rules have been introduced that follow the oft-cited ‘more economic approach’, superseding


the traditional orientation towards a balanced market structure with an efficiency perspective that is geared towards the individual case. Vertical integration is therefore endorsed (Williamson 1968, 32, 2005b, 58; Posner 1981, 6; Riordan and Salop 1995, 514). According to the ‘make-or-buy’ model, the degree of vertical integration that is observed in practice must be efficient, since it has outperformed market transactions and thus proved to be superior (Teece 1985, 235; Kruse 1997, 247; Schmidt 2005, 103; Mertens 2011, 138–40).

This assessment might hold for the individual case under the given circumstances. However, seen from a macroeconomic perspective, that is, from the more fundamental orientation of competition policy in a broader sense, this assessment is inadequate: A narrow focus on efficiency neglects that the design of the institutional framework is itself a part of the issue. Such a focus does not pay enough attention to the fact that a global economic constitution primarily needs a functioning transaction law. The assessment of vertical integration according to the criteria of institutional economics that we have outlined above is positive only because no reliable interna-tional private law regime exists that could facilitate cross-border transac-tions between anonymous actors. In contrast to the historical development at the national level, the economic expansion in the present age of glo-balization is not accompanied by the parallel development of state-created private law institutions that meet the demand of cross-border commerce; rather, economic actors remain dependent on private governance mecha-nisms whose cost structures slow down economic development (Calliess and Mertens 2010; Mertens 2011) – albeit, as Dietz (2014) points out, to a lesser extent than in the past.

Overall, the narrow focus on efficiency in competition policy leads representatives of public interests to exert insufficient lobbying pressure to supranationalize commercial law. Thus national objections against an inter-national private law system cannot be overcome. The high degree of vertical integration in global markets is not interpreted as an incentive to establish a uniform commercial law as a fundamental pillar of a global economic con-stitution, but vertical integration is welcomed in the light of a competition policy based only on efficiency criteria in individual cases.

Accepting private norm formation: The lex maritima as a model for the intra-industry reconciliation of interests

A study of private self-regulation in the maritime industry confirms our third hypothesis. Privately made law regimes are often suspected to further spe-cial interests (Fischer-Lescano 2010; Rühl 2011). However, as Maurer (2010, 2012) has shown, private governance mechanisms may not only ensure legal certainty, but also fairness. In the formation of private norms, participatory procedures may ensure that the special interests of (economically) stronger interest groups will not prevail over the weak.


International maritime trade – the focus of Maurer’s study – is an indus-try that is traditionally cross-border oriented. Over centuries, a private system of self-regulation has grown that operates without recourse to state institutions (Großmann-Doerth 1930; Maurer 2012). Norm setting, implementation and enforcement are carried out predominantly by private actors. Particularly significant is the procedure in which industry-specific standard form contracts are generated – that is, the process of norm setting.

Charter parties, that is, contracts to rent a ship, serve as a prime example here. In the maritime industry, the use of standard form charter parties can be traced back to the 15th century (Raiser 1935, 26). The Recommended Uniform General Charter GENCON 94, for example, is the most popular and widely used general purpose voyage charter party in the industry. It is issued by the Baltic and International Maritime Council (BIMCO), a shipping association providing services to its global membership of stakeholders with vested interests in the shipping industry, including shipowners, operators, managers, brokers and agents. The association’s main objective is to facili-tate the commercial operations of its membership by developing standard contracts and clauses. The drafting is done in working groups in which par-ticular care is taken to ensure equal representation of all interested parties (Hunter 2008).

The BIMCO members, as users of the standard form contracts, are encour-aged to provide feedback on problematic aspects of existing contracts or to suggest improvements. Next, a smaller expert committee, the Drafting Committee, prepares drafts based on the feedback received. These drafts are circulated to all industry members so that later users of the form – those affected by the rules – can comment and make suggestions that are in turn taken up in further drafts. As soon as a final draft is produced, the Drafting Committee submits it to the Documentary Committee for final approval. The whole procedure takes between two and three and a half years before a new rule or standard contract form is recommended (Maurer 2012).

The BIMCO standard form contracts in general consist of two parts: The first part includes predetermined rules and the second one, the so-called box layout, allows parties to establish their own rules or to choose from given alternatives (Maurer 2012). In particular, every form includes a liabil-ity regime that takes into account the peculiarities of maritime trade and of the specific transaction. It also includes an arbitration clause that designates a private arbitral tribunal – such as the London Maritime Arbitrators Association – to settle any legal disputes that may arise. Once a form is complete, it is published (Maurer and Beckers 2009; Hoffmann and Maurer 2010).

While negotiation and agreement over the wording of standard contracts does not, technically speaking, qualify as legislation, the acceptance and generalizability of rules drawn up in this manner is achieved by involving


all interested parties in norm formation. Such opportunities for participa-tion establish the normativity of private norm setting in the maritime trade industry (Köndgen 2006; Maurer 2012). Private norms gain normative power not through majority decision but through the balanced integration of all interested parties in negotiation processes in which the formation of the norm is structured (Roberts 2005, 23). This complex and sometimes lengthy norm-setting procedure is therefore not comparable with the emergence of common law, although both of these evolutionary processes address norma-tive complexes that originated in society (Maurer 2012). Whereas common law evolves through the passing of court judgements and the setting of prec-edents, and hence in diffuse processes ‘which are due to the silently active forces of the informal coordination of behaviour’ (Teubner 2000a, 440), the rules of maritime trade emerge and are further developed in planned, coor-dinated processes and procedures that are highly formalized and offer exten-sive opportunities for participation. In this way, the lex maritima is formed, a privately generated law of merchants active in cross-border maritime trade (Maurer 2012). Participation has the effect that all merchants involved per-ceive the rules of the industry as fair. Attention to fairness in the norm set-ting of the maritime trade industry is clearly conducive to a high degree of rule compliance so that the actors do not feel a (practical) need for state regulation.

Mandatory transnational law: The social regulatory function of private law in international arbitration

State private law does not only safeguard transactions, it also protects the interests of structurally disadvantaged parties or third parties who are not involved in a legal dispute through mandatory provisions – the so-called mandatory norms (Renner 2011, 24–34). In this manner, the autonomy and private leeway of the contractual parties is constrained by public interests. However, since private governance mechanisms are services offered on the market, the providers of such services have to address the needs of their customers in order to be successful. This is why one may assume that provid-ers of private governance mechanisms like arbitration institutions are not likely to take into account third-party or public interests on a regular basis (Calliess and Renner 2009; Renner 2011, 19–21). The public court system, by contrast, is generally considered to protect third-party and public interests. Thus nation states should be expected to pursue the supranationalization of commercial law, for instance, by establishing international commercial courts (Hoffmann 2011).

It is questionable, however, whether the transnationalization of commer-cial law necessarily implies a neglect of public interests. Some scholars have argued that private governance mechanisms are per se unable to perform social regulatory functions along the lines of the reasoning presented above. Such an argument was put forward as early as 1936 by the Reichsgericht


(Imperial Court of Justice), the supreme criminal and civil court of Germany until 1945:

Only an unconditional submission under a specific law-making author-ity [. . .] can guarantee that a contractual relationship will be regulated, if necessary, against the selfish will of the economically stronger partner or of both partners, with regard to those public policy concerns that are based on general principles of law.1

Other authors who observe the trajectory of the new lex mercatoria have argued that arbitrators, for instance, do not only provide dispute resolution services (as merchants of law) but also contribute to the public good (as moral entrepreneurs) while contributing to the creation of a transnational legal order (Teubner 2000b, 2004; Fischer-Lescano and Teubner 2004).

With this theoretical dispute in mind, Renner conducted a qualitative analysis of arbitral awards (Renner 2011, 91–198). He investigated whether international arbitrators take norms that protect the public interest into account: (a) the prohibition of cartels in competition law, (b) the prohibi-tion of corruption and (c) norms protecting the interests of weaker contract parties, such as the rules protecting commercial agents. His findings indicate that these social regulatory aspects are, in fact, taken into account in interna-tional arbitration proceedings, so that the pressure to generate public regula-tion is reduced in line with our third hypothesis.

The means to protect public interests in private law is mandatory law. One problem with regard to international arbitration is that the parties can freely choose the applicable legal order. Since they may also choose a legal order with a low degree of protection for public interests, they could opt out of public reg-ulation. Avoiding mandatory legal provisions meets practical limits, however, as only enforceable arbitration rulings are of value to the parties concerned. According to the almost globally valid New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention),2 no de novo assessment of an arbitration award is allowed in state courts; enforce-ment through the state apparatus can, however, fail due to a violation of the national ordre public. Thus international arbitration functions independently from national private law regimes, yet it cannot work entirely independently from them (Schlosser 1989). This tension is also expressed in the International Chamber of Commerce (ICC) Arbitration Rules (2012): Art. 21 (1) of the Rules allows the parties to agree on the rules of law to be applied to the dispute and, in the absence of such agreement, leaves it to the arbitral tribunal to apply the rules of law which it determines to be appropriate; but, under Art. 41, the arbitral tribunal shall make every effort to make sure that the award is legally enforce-able (Calliess and Renner 2009, 1345).3 Against this backdrop, the question that arises is whether arbitral tribunals apply mandatory provisions independently of the legal order chosen by the parties and, if so, which provisions are concerned.


Renner investigated the application of provisions under cartel law by inter-national arbitral tribunals. In the case law of national courts, two rulings espe-cially established the view that the ban on cartels is a matter of public policy that must be observed by arbitral tribunals – and that, if an award is supposed to be declared enforceable, it must guarantee to do so. In its 1985 Mitsubishi ruling,4 the US Supreme Court decided that a dispute between a Japanese and a Puerto Rican party could be tried before an arbitral tribunal, although the contract potentially violated the US cartel ban of the Sherman Act. The Supreme Court assumed that the arbitral tribunal would apply the provisions of cartel law in the same way a US state court would. In the Eco Swiss case, which also concerned cartel law,5 the European Court of Justice ruled that all courts in the European Union (EU) had to declare all arbitral awards void or non-enforceable that violated the ban on cartels under European law, now Art. 101 of the Treaty on the Functioning of the European Union.

Empirical analysis of awards issued by the Court of International Arbitration of the ICC over the past 15 years indicates that arbitral tribunals are, in prin-ciple, willing and able to apply the general provisions of cartel law and to impose the ban on cartels. Overall, a pragmatic approach but no coherent methodology of arbitral tribunals can be observed. The practice of arbitral tribunals and the reasoning in their rulings are not coherent. In one case,6 for instance, a tribunal ruled that Art. 101 of the Treaty on the Functioning of the European Union had to be applied in conformity with the Mitsubishi rul-ing and due to more general considerations, although the parties had agreed to apply the law of the State of New York; yet in a comparable case,7 another tribunal rejected the application of European cartel law on the grounds that the parties had expressly agreed on New York law (Calliess and Renner 2009, 1349). Where provisions of cartel law are applied, an express justification is often lacking. For instance, if Belgian law is chosen, EU cartel law is applica-ble as a part of mandatory European law without further justification. Only in cases in which the parties have agreed to circumvent the application of the provisions of cartel law are more complex models, such as the ‘law as a fact’ doctrine, used to apply European cartel law (Calliess and Renner 2009, 1349).

Such incoherent dogmatic reasoning highlights the problems of establish-ing uniform rules for the application of cartel law provisions in international arbitration. Especially in the light of the impossible endeavour to develop internationally accepted provisions of cartel law due to fundamentally dif-ferent national (or, in the case of the EU, supranational) competition law regimes, it remains difficult to arrive at a coherent reasoning for the applica-tion of cartel law provisions (Calliess and Renner 2009, 1350). In sum, how-ever, the empirical study shows that the enforcement of cartel law is taken to be in the public interest, and that arbitral tribunals do apply these rules. As private governance mechanisms, arbitral tribunals are therefore at least partly able to guarantee the legal regulatory component of an international economic constitution (Calliess et al. 2013).


The application of anti-corruption provisions by arbitral tribunals is more straightforward. Since here, in contrast to cartel law, no fundamental dis-agreement exists between national legal orders, arbitral tribunals in most cases justify the ban on corruption with general legal principles and interna-tional agreements. Only in cases where national law stipulates dramatic legal consequences if the ban on corruption is violated – as in the US Racketeer Influenced and Corrupt Organizations (RICO) Act, which permits so-called triple damages – do arbitral tribunals need to justify the application of indi-vidual national provisions (Calliess and Renner 2009, 1351). Since the obser-vance of the corruption ban is, in general, international consensus, arbitral tribunals apply anti-corruption provisions consistently. Here in particular the study shows that as a private governance mechanism, arbitral tribunals take matters of public interest into consideration.

As concerns provisions protecting commercial agents, Renner also observes an – albeit inconsistent – application by international arbitral tribunals. In international disputes, application is more difficult: Provisions protecting the weak differ significantly from one legal order to another and nation states are reluctant to compromise, since protecting the weak is perceived as an iden-tity-generating factor for their legal orders (Calliess and Renner 2009, 1352).

In any case, the guidelines of the European Court of Justice are unequivo-cal. In its Ingmar ruling, the Court stated that observing the European com-mercial agent law is also mandatory for international arbitral tribunals.8 If the parties choose the law of an EU member state to be applicable to their contract, the respective mandatory European provisions are applied by arbi-tral tribunals as part of the chosen law – as had been the case even before the Ingmar ruling. However, where parties choose the lex mercatoria or the law of a third state to govern their contract, arbitral tribunals often reject the principle of the protection of the weak (Calliess and Renner 2009, 1352). It is, however, noteworthy that the reasoning adopted by the arbitral tribunals for the protection of commercial agents in individual cases would not be valid under traditional international private law doctrine. For instance, one arbitral tribunal deemed the European commercial agent provisions appli-cable in a case in which the parties had agreed on applying the Contracts for the International Sale of Goods and the UNIDROIT principles of the International Institute for the Unification of Private Law, since the EU pro-visions were anchored in the respective domestic legal orders of the parties involved.9 In another dispute,10 an arbitral tribunal ruled that the respec-tive EU Directive was directly applicable, since the parties had opted for the Directive as their law of choice (Calliess and Renner 2009, 1353).

The empirical study of arbitral awards thus shows that private govern-ance mechanisms can also take into account matters of public interest, though not to the same extent as national courts do. As a consequence, there is less urgency for stakeholders to push for a supranationalization of commercial law.


Conclusion

The high significance of private institutions for generating legal certainty in cross-border trade may be explained by the fact that they do not limit themselves to generating mere legal certainty; rather, such institutions offer a minimum standard of fairness and take matters of public interest into consideration. Private arbitral tribunals observe national cartel and corruption laws, and as we have seen in the case of private legislation in international maritime trade, the notion of fairness is particularly manifest in the comprehensive participatory opportunities for stakeholders and all those affected by such legislation. Our study of the international software industry illustrates the high operational capability of private governance mechanisms, especially in the transnational sphere, since modern ICTs allow cross-border transactions without any complications. Since private institutions provide satisfactory solutions for cross-border trade, the prob-lems associated with the transnationalization of commercial law are hardly recognized.

Consequently, actors in international trade do not exert political pressure to supranationalize commercial law. The experience of the past century indi-cates that without such political pressure, the consensus required for a supra-nationalization of commercial law, for instance, through a uniform global commercial law, cannot be achieved (Kronke 2001; Calliess 2004; Calliess et al. 2007).

As supranational solutions are not available, further transnationaliza-tion of commercial law might still be offset by a targeted improvement of state institutions. State institutions generating legal certainty are primar-ily state courts and state private law. At present, however, the organiza-tional structure and the procedures of state courts are still geared entirely towards national disputes and are therefore less appropriate for dealing with cross-border trade disputes. Moreover, state courts regularly refuse to recognize private legal rules – such as the lex maritima of international maritime trade – when they deviate from mandatory state law (Maurer and Beckers 2009; Hoffmann 2011, 85). Due to the interest of actors in international trade in using the rules they themselves have estab-lished and in leaving them unaltered, these actors are reluctant to use state courts and prefer private arbitral tribunals (Calliess and Hoffmann 2009b; Hoffmann and Maurer 2010; Hoffmann 2011, 31). Traditionally, these private arbitral tribunals are closely linked to international trade, and they can accommodate much better structurally to the particularities of cross-border trade (Großmann-Doerth 1930; Rabel 1936; Dezalay and Garth 1996). The current diagnosis in the era of globalization therefore is a ‘denationalisation of the judiciary’ (Hoffmann and Maurer 2010), while at the same time private arbitral tribunals continuously become more significant (Hoffmann 2010).


Although nation states still struggle to offset the transnationalization of commercial law with concepts of order adapted to globalization, there are first indications that nation states do recognize the necessity to adapt state courts to the particularities of cross-border trade (Hoffmann 2011, 175). As from 2008, for instance, there has been a German legal policy debate under the label ‘Law – Made in Germany’ over the growing significance of German law in cross-border trade issues. The initiative was preceded by a move of English lawyers, who had published a brochure on ‘the jurisdic-tion of choice’, addressing an international audience and advertising English national courts (Triebel 2008; Calliess and Hoffmann 2009a, 2009b). One element of the German initiative is the introduction of draft legislation for courts dealing with international commercial matters (Bundestagsdrucksache Nr. 17/2163). These special courts for international commercial disputes would be established in selected German regional courts. According to the bill, such a special jurisdiction would allow legal proceedings to take place in the language of world trade, that is, in English (Calliess and Hoffmann 2010; Calliess 2011). At the moment, however, it is still unclear whether that draft will ever become law. Furthermore, additional reforms are conceivable that could strengthen the importance of state jurisdiction for cross-border trade, like abandoning an appeal to allow faster dispute settlement at one stage (Hoffmann 2011, 178).

Establishing courts for international commercial affairs in Germany would be a first step towards strengthening state institutions. This would, however, only increase the competitiveness of existing national institutions and not lead to a supranationalization of commercial law. Yet empirical studies of national trade indicate that a targeted improvement of state infrastructures may at the same time reduce the significance of arbitral tribunals (Drahozal 2009). In this way, the transnationalization of commercial law could, in the long run, be offset by restructuring state courts such that they do accommo-date the particularities of cross-border trade.

Notes

1 Reichsgericht, Juristische Wochenschrift (1936), at page 2059 (our translation).2 New York Convention on the Recognition and Enforcement of Foreign Arbitral

Awards, June 10, 1958, 330 U.N.T.S. 38.3 ICC, International Court of Arbitration, ICC Rules of Arbitration (in force since

1 January 2012), available at http://www.iccwbo.org4 Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985).5 Case C-126/97, Eco Swiss China Time Ltd v. Benetton International NV (1999).6 ICC Case No. 8626 (1996), J. Droit Int’l (Clunet) 1073–1079 (1999).7 ICC Case No. 7893 (1994), Y. B. Com. Arb. XXVII 139–152 (2002).8 ECJ Case No. C-381/98 – Ingmar GB.9 ICC Case No. 8817 (1997), 25 Y. B. Com. Arb. 11–432 (2000).

10 ICC Case No. 12045 (2003), 133 J. Droit Int’l (Clunet) 1434–1443 (2006).

Part IVLegitimacy Dimension: Democracy

145

8Cultures of Political Discourse in Europe: Explaining Multiple Segmentation in the European Public SphereAndreas Hepp, Katharina Kleinen-von Königslöw, Swantje Lingenberg, Johanna Möller, Michael Brüggemann and Anke Offerhaus

The possible development of a European public sphere is a special challenge for research on transformations of the state in Europe. Undoubtedly, the supranational regime of the European Union (EU) is a major expression of the transformations of the state and the transnationalization of politics in Europe. Current political theory argues that supranational institutions are faced with various legitimation problems (Habermas 2009a; Scharpf 2009). In addition to elections, a functioning ‘public sphere’ is often seen as a prerequisite of political legitimacy.

The EU must, then, be underpinned by a ‘European public sphere’ to be legitimate. However, any attempt to capture this phenomenon solely with concepts gleaned from analyses of national public spheres is bound to fail: There is no Europe-wide system of political media and no shared language, but rather a plethora of divergent media regulations and languages, and there are only a couple of transnational European media (Gerhards 2001; Hallin and Mancini 2004; Hardy 2008; Brüggemann et al. 2009). Measured against the benchmark of national public spheres, the European public sphere is therefore automatically found wanting, or even deemed inexistent (Baisnée 2007).

We develop a more balanced view. Our starting point is a European public sphere that differs from national public spheres precisely because it contains various languages, media systems and media organizations. With other researchers (Eilders and Voltmer 2003; Kantner 2004; Trenz 2004; AIM Research Consortium 2006; de Vreese 2007; Preston and Metykova 2009; Koopmans and Statham 2010), we share the fundamental position that the European public sphere needs to be analysed as a process of transnational-izing national public spheres and cannot be described and understood as an independent unit. However, transnationalization is not a linear and directed process, but in various ways a contradictory one.

146 Cultures of Political Discourse in Europe

These general reflections underpin the empirical study presented here. We performed a longitudinal newspaper content analysis of the leading quality and tabloid newspapers in six European countries – Austria, Denmark, France, Germany, Poland and the United Kingdom – covering the 1982–2008 period. The analysis reveals several processes of transnationaliza-tion. These processes, however, remain segmented with regard to newspaper type – both nationally, a logical consequence of our theoretical starting point, and transnationally. We are therefore confronted with a multiply segmented European public sphere.

To explain such complex results, we closely examine the practices of jour-nalists who create this media coverage. Based on newsroom observations and qualitative interviews, we find different ‘political discourse cultures’. Given our theoretical starting point, it is not surprising that we can show how national political discourse cultures survive within the larger European pub-lic sphere. However, we also identify transnational orientations, albeit again segmented by newspaper type. This explains the multiple segmentation.

The baseline for our research is a special understanding of ‘ explanation’. We do not pursue a strictly causal explanation along the lines of the covering-law model (Hempel and Oppenheim 1948). Rather, we explain the multiple segmentation of the European public sphere through the social processes that have contributed to its construction (Berger and Luckmann 1967; Knoblauch 2013). Thus, in line with Max Weber’s (1978, 4) notion of ‘interpretative understanding’ (Verstehen), we shed light on the multiple segmentation of the European public sphere by examining the practices of its ‘re-articulation’ in the social world and hence, ultimately, by ‘looking at what journalists do’. We now lay out this explanatory approach before we present our core research results.

The explanatory concept: Cultural patterns as modifiers

The concept of a ‘public sphere’ – first introduced in the eighteenth century and further theorized since the 1960s (Habermas 1989) – has become a key concept for research on political communication. Without going into detail, we define a public sphere empirically as a ‘thickening’ (Verdichtung; Couldry and Hepp 2012) of publicly accessible political forums, that is, as the crea-tion of dense networks that legitimate political decision-making and actions (Ferree et al. 2002; Nieminen 2009). A public sphere is thus a space of politi-cal communication ‘characterized by a higher density internally than that across borders’ (Peters 2008, 218).

This understanding of public spheres allows us to theorize simultaneously about national public spheres and a transnational public sphere in Europe. While national public spheres remain ‘thickened’ spaces of national political communication, the European public sphere represents a communication layer of somewhat lower density that extends across these national public

Andreas Hepp et al. 147

spheres and slowly intensifies as transnationalization increases. However, as we have mentioned, the European public sphere is segmented not only by nations but also by type of newspaper.

This multiple segmentation of the European public sphere can best be explained culturally. Arguing simply from the perspective of political economy would not go far enough, since newspapers in all the countries studied are privately owned and there is no difference with respect to state, public or private ownership. In addition, shared transnational ownership, as with the Polish Fakt and the German Bild (both part of the Springer press consortium), does not necessarily result in shared transnational coverage. Moreover, though significant, language is not a sufficient explanation for multiple segmentation, as national segmentation also occurs between countries of the same language, for instance, between Austria and Germany. As Bernhard Peters (2008, 246) has argued, however, ‘public spheres have a social and cultural foundation that extends well beyond the framework of media markets and media organizations’. This foundation should be theorized as a ‘political discourse culture’ (Hepp and Wessler 2009; Hepp et al. 2012). In a nutshell, a political discourse culture is a particular thickening of cultural patterns – producing, representing and appropriating political communication as well as related cultural patterns of regulation and identification. While political discourse cultures, therefore, are multi-level phenomena that relate to the production of mediated political meaning as a whole, one of their aspects is particularly relevant to our endeavour, namely, their ‘re-articulation’ in the everyday practices of journalists. Patterns of political discourse cultures are more stable than are political discourses on a particular topic – these discourses can be highly situation-dependent – and, taken together, they provide the communicative spaces of national and transnational public spheres with the necessary substance.

Our approach helps to explain the current multiple segmentation of the European public sphere. In Figure 8.1, we depict the complex interrelation-ship between ‘meta-processes’ (understood as the ‘driving forces’ at work behind the changes in political communication), cultural patterns operating as ‘modifiers’ and the resulting multiply segmented, transnational European public sphere. We argue that each country in Europe is confronted with equivalent changes at the meta-level. These changes include, first and fore-most, globalization (Tomlinson 1999), which is reflected politically, inter alia, in the ongoing shift of decision-making authority to the supranational EU project (Beck and Grande 2007). Consequently, EU politics becomes ever more relevant at the national level, which explains the increase in trans-national and supranational monitoring of EU and other member states’ domestic politics. Second, current technological developments facilitate transnational and transcultural communication by satellite and through digital media (Thussu 2006; Hepp 2015). These technological advancements clearly impact the transnationalization of national public spheres. Finally,


we can discern a change of individual values in political and social attitudes, cumulating across Europe in a widespread trend towards individualization (Inglehart 1997; Beck and Beck-Gernsheim 2002).

These driving forces do not necessarily lead to a homogeneous transna-tional communicative space. In fact, our research reveals two modifiers. First, we found national differences in the practices of journalists and related cultural patterns of political communication. Second, at a transnational level, we encountered differences in newspaper types, that is, media outlet-related cultural patterns of political communication. These two types of modifiers ‘filter’ the meta-processes of change – the driving forces – nationally and transnationally, and they shape a multiply segmented European public sphere. The first kind of filtering process – rooted in the relative stability of national patterns of political communication – has already been described in extant research (Pfetsch 2001; Adam 2007; Koopmans and Statham 2010). The second kind of filtering has only been discussed as a general possibility of transnational and transcultural professionalism in journalism (Mancini 2008), but it has not yet been researched.

It would be a mistake, however, to downgrade the explanatory approach to the notion that cultural patterns of political communication are simply ‘out there’ and may be reduced to an intervening variable. According to Bruno Latour (2007, 35), no culture is socially inert beyond the field researched. In everyday thought, discourse and practice, patterns of culture are continuously re-articulated – and only in this ongoing process of re-articulation can modifiers have a segmenting effect. In other words, in an ethno-methodological sense (Garfinkel 1967), we do not find a cultural explanation behind, but in every-day thought, discourse and practice. That said, we characterize our research as being part of the cultural studies – or cultural analysis – tradition, since

Figure 8.1 Explaining the multiply segmented European public sphere


we understand culture not as a dependent variable explaining something else, but rather focus on the day-to-day re-articulation of culture itself (Hall 1997, 220) and thus develop an understanding of the multiply segmented European public sphere.

These general reflections lead to two research questions. First, how can we describe the European public sphere in light of the multiple segmentation of media contents? Second, how can we elucidate the emergence of the forms of multiple segmentation through the re-articulation of cultural patterns by everyday activities of journalists? The next section addresses the first research question, and in the two following sections we take up the second question.

A multiply segmented phenomenon: The European public sphere

In line with our theoretical approach, we investigated the articulation of a European public sphere empirically across the three-dimensional transna-tionalization of national public spheres:1

• the vertical dimension, that is, the monitoring of EU politics by the media of each member state;

• the horizontal dimension, that is, joint discussions about each other tak-ing place across national borders;

• the collective identification dimension, that is, the expression of a shared sense of belonging, for example, by reference to Europeans as ‘we’.

Based on these considerations, we conducted a content analysis of the major quality and tabloid newspapers in six European countries – Austria, Denmark, France, Germany, Poland and the United Kingdom – over two constructed weeks in 1982, 1989, 1996, 2003 and 2008.2 We focused on the press because quality newspapers may be considered to have the most transnationalized media content – much more so, for instance, than television news (Kevin 2003; Groothues 2004) – while tabloids may be seen as their opposite in this respect. In addition, a focus on print media makes historical content analysis possible. Our main focus in the content analysis was on discursive articles published in the political section of the newspapers.

Vertical Europeanization: Growing interest in European affairs

In the first dimension of our analysis, all countries and all newspapers show a trend towards vertical Europeanization, that is, towards a higher frequency of discussions on EU institutions and EU politics. However, this pattern clearly differs between the two types of newspapers. In the quality papers, vertical Europeanization crops up both in increasing mentions of EU insti-tutions and in a growing focus on EU politics, even though by 2008 this development stagnated in Germany and Poland or was even reversed in the United Kingdom, France, Denmark and Austria.


In the tabloids, by contrast, EU politics as the main topic of debate appears to be a lost cause; the share of articles focusing on EU politics peaked in 1996 at a mere two per cent. The role of the EU is mostly limited to mentioning EU insti-tutions in the discussion of national politics, and even this happens a lot less in tabloids than in the quality press, on average in only 4 per cent of all articles, as compared to 21 per cent in the quality press. Still, this role of EU institutions has increased since 1982 and it continued to grow even in 2008, but by then most of the quality papers had already lost interest in EU institutions.

Horizontal Europeanization: Intense but stable interest in the opinions of European neighbours

In the second dimension, by contrast, interest in the affairs and opinions of neighbouring European countries remains stable over time for most of the analysed newspapers. While the shares of articles discussing other EU coun-tries or quoting speakers from EU countries occasionally fluctuates a little, no general trend emerges. Nevertheless, EU member states play an important role in national public debates; in the quality papers, on average 18 per cent of the articles discuss other EU countries. Somewhat surprisingly, with 15 per cent, interest is almost as high in the tabloid press. However, a closer look at the actual topics reveals that the tabloids are even less interested in the politics of other EU member states than they usually are in domestic politics, focusing on foreign VIPs, catastrophes or weird stories set in foreign countries instead.

The gap between the two newspaper types is significantly larger when we look at the cited speakers. In the quality press, speakers from other EU coun-tries make up 16 per cent of the debate, while half of the cited speakers have national origins. In the tabloids, national speakers completely domi-nate public discussion, making up almost 80 per cent of all cited speakers, and Europeans are relegated to the sidelines, amounting to only 8 per cent of all speakers cited. A notable exception with a clear trend towards hori-zontal Europeanization is Poland. Both types of Polish newspapers have, since 1989, become more open to the concerns and voices of their (West) European neighbours, although the trend levelled off in 2008.

Collective identification: Tentative glimpses of a collective European identity

In the third dimension, differences between the two newspaper types are most striking. In the quality press, collective identification with Europe appears to grow both in the use of the more detached ‘the Europeans’ and in the more evocative ‘we Europeans’. Between 1982 and 2008, the use of ‘the Europeans’ as a collective doubled from four per cent to eight per cent, and while direct identification with ‘we Europeans’ peaked in 2003 at five per cent, it never-theless remained stronger in 2008 than it had been in the preceding decades.

Meanwhile, in the tabloids over the same period, collective terms such as ‘the Germans’ and ‘the Europeans’ were used so sparingly that no meaningful


interpretation is possible. But even among the more prevalent ‘we’ identifi-cations, ‘we Europeans’ never reaches a frequency that might be noticed by tabloid readers, and less than half a per cent of all ‘we’ phrases in tabloids refer to European identity.

Country-specific and newspaper type-specific patterns of Europeanization

In Figure 8.2, we visualize the two key results of our content analysis. It shows the relative position of each newspaper in the two dimensions of Europeanization, that is, vertical and horizontal Europeanization.3

Quality and tabloid papers are clearly separated by their level of vertical Europeanization: The French Le Monde achieves by far the highest score, fol-lowed at some distance by the Austrian Die Presse and by the remaining four quality papers from Germany, the United Kingdom, Denmark and Poland. The tabloids, by contrast, all show very similar levels of interest or, better, disinterest in EU affairs.

In the horizontal dimension of Europeanization, however, similarities between quality and tabloid newspapers in each country become apparent.

Figure 8.2 Levels of vertical and horizontal Europeanization, quality and tabloid newspapersNote: Average deviation from mean for both indicators of vertical Europeanization (visibility of EU institutions/focus on EU politics) and horizontal Europeanization (focus on other EU countries/extended quotations of speakers from other EU countries); tabloids are in italics; dotted lines con-nect newspapers from the same country.


Austrian papers, for example, show the most interest in their European neigh-bours, and the Austrian tabloid Kronenzeitung even achieves a greater degree of horizontal Europeanization than do the quality papers from Denmark, France, Poland and the United Kingdom. Runner-up for the two media types are the German papers, Frankfurter Allgemeine Zeitung and Bild. At the other end of the scale, not only is the British The Times the most parochial of all quality papers,4 but the British tabloid The Sun also shows the least interest in the concerns of its European neighbours.

Thus the complex results of our analysis are best summarized by using the concept of a multiply segmented European public sphere. Across all countries, a European public sphere exists in the sense that EU politics is monitored and reported on. However, this sphere is, on the one hand, nationally segmented inasmuch as the monitoring of EU politics continues to be framed as national reporting and media coverage of EU politics by newspaper jour-nalists remains embedded in a national context. On the other hand, it is transnationally segmented by newspaper type, that is, the quality press is much more Europeanized than the tabloid press (or the regional press; see Offerhaus et al. 2014).

National segmentation: Journalistic practices of ‘nationalization’

In order to answer our second research question – how can we elucidate the emergence of the forms of multiple segmentation through the re-articulation of cultural patterns by everyday activities of journalists? – we conducted qual-itative newsroom studies in each of our six European countries to identify and describe national and transnational commonalities in the cultural pat-terns of the production of EU and European foreign news. The studies were undertaken in parallel in the autumn of 2008 and consisted of interviews with EU and foreign news editors, chief editors and foreign correspondents of 23 quality, tabloid and regional papers,5 participant observation of two newsrooms per country for three to five workdays and the consultation of the research diaries of each researcher.6

This material was coded according to grounded theory methodology and analysed in a transcultural perspective (Glaser and Strauss 1967; Hepp 2009). The aim was to discover national peculiarities through country comparisons and, moreover, to explore transnational patterns of journalistic news pro-duction signalling cultural patterns that differ by type of media outlet.

Understood as a set of journalistic practices, ‘nationalization’ describes the articulation of news content such that a reader living in a given coun-try can relate the news to her own national experience. Thus nationaliza-tion refers to the journalistic practices of embedding foreign issues in the ‘context’ of one’s own nation – and hence ‘re-articulating’ the context. We focused on patterns of nationalization for two reasons. First, this is a key


area of ‘constructing the nation’ through journalistic practices. Second, as self-constructions differ from nation to nation, we can also expect sub-stantial national differences here. Some categories developed in our open coding process proved particularly relevant to identify nationalization practices in our newsroom studies data: the preferred topics of the journal-ists and their ways of constructing the importance of reporting on the EU, the importance of reporting on EU countries and the importance of reporting on other foreign news.

By applying second-level ‘axial coding’ (Strauss and Corbin 1998, 123) to the sections of our interview and observation data that were coded according to the categories mentioned above, we identified four patterns of nationalization in the journalistic practices: ‘embedding the national’, ‘con-textualizing in the transnational’, ‘prioritizing the national’ and ‘routiniz-ing the transnational’. Although these patterns occur in all countries, there are national differences in the form of their articulation, and hence in how nationality is articulated.

Embedding the national: Linking Europe and the world back to the nation

The journalistic practice of ‘embedding the national’ consists in linking Europe and the world back to national contexts and pointing to the relevance and consequences of foreign events for one’s own nation. Journalists place foreign news in national contexts by linking them to national political, social or economic events and developments, and to experiences and prob-lems which the readers feel familiar with in their given national life worlds. In some cases, journalists perceive the national relevance of foreign news as ‘naturally’ given, so the national relevance only needs to be alluded to, which is, of course, also a form of construction. In other cases, journalists consciously construct the national link from their own perspective. For example, a French journalist states: ‘EU politics has a direct impact on French politics and social developments. [. . .]. It’s our task to explain how this influ-ence works’ (EU editor, Le Monde, FR). And a Danish journalist builds a link to his own nation by interviewing a ‘Danish police officer [. . .] working in Kabul’ (editor-in-chief, Politiken, DK), thus providing Danish readers with some access to the EU’s Afghanistan policy.

Focusing on the national peculiarities of journalists’ practices, we find journalists in Austria repeatedly pointing out that they link EU and foreign news not only to national, but also to regional and local contexts. Moreover, Austrian journalists tend to create historical links, especially when they report about neighbouring Eastern European countries with which Austria has a common history. Accordingly, one of the Austrian interviewees states that the staff correspondent in Zagreb is regarded as ‘a tradition, because the Eastern European region is of high importance for us’ (political editor, Kleine Zeitung). Similarly, embedding news historically characterizes journalistic


practices in Germany. However, historical references are primarily related to the Nazi period and the Second World War.

Typical of Danish journalistic practices is the fact that national embedding plays a pivotal role. The obvious relevance of foreign issues to the national interest often serves as selection criterion: ‘Regarding the EU there is some kind of self-censorship. [. . .]. The international agenda is not easy to put across to the readers. They usually want something concretely related to Danish political topics’ (foreign news editor, Berlingske Tidende).

As in Austria and Germany, journalistic practices in France are charac-terized by historical references. They mainly relate to French colonialism, especially when reporting about North African topics. The journalists stress that not only many Africans live in France, but they also display a sense of historical responsibility. Also special for France is that journalists often make comparative references as they report about European countries: ‘Important for us is whether the story from abroad can serve as an example for us in France, so that we can learn from it’ (editor-in-chief, Le Parisien).

In the United Kingdom, journalists tend to construct humorous, satirical links – especially when they report about neighbouring EU countries. In doing so, the Britons’ detached attitude towards the EU is reflected in a rather ‘light-hearted’ manner of reporting.

In Poland, like Denmark, national embedding of the news plays a central role in journalistic practices. Moreover, Polish journalists build historical references to the national experience of Communism and the Second World War. For example, one of the interviewees claims to have introduced the German candidate for Chancellor, Frank-Walter Steinmeier, as ‘pro-Russian’, assuming that this would ‘attract interest among Polish readers’ (foreign news editor, Dziennik Zachodni) and that the readers would associate the label with the sufferings Poland had to endure from the Germans and the Russians in and after the Second World War.

Contextualizing in the transnational: Europe and the world as a defining horizon for the nation

‘Contextualizing in the transnational’ is about using ‘the transnational’, including Europe and the world, as a context for the nation by stressing the importance of national events for the transnational environment. Thus, transnational contextualization entails the reporting of national events on a transnational background and thereby makes it easier to understand the relevance of such events.

This ‘contextualizing in the transnational’ may take place either explicitly, for example, by stressing the national contribution to certain transnational political developments, or in an implied fashion, for instance, by relying on an association with some transnational interest of the nation in question, so that the national relevance of an issue may be revealed only indirectly by the fact that the transnational aspect is touched upon in national political


discourse. The latter, for instance, occurs when a nation’s belonging to Europe is taken for granted and is taken, as such, as a starting point of report-ing on topical political issues. An example for the former is stressing the nation’s contribution to moulding the future shape of the EU.

In Austria, journalists often contextualize a news item transnationally without making explicit links to national contexts, arguing that foreign news ‘issues [. . .] are always attractive’ (EU editor, Die Presse). Similarly, trans-national contextualization without direct links to Germany plays an impor-tant role in German journalistic practices. The interviewed journalists take it for granted that their country is already an integral part of transnational contexts, so Germany’s contribution needs no explication.

Journalists in Denmark also employ implicit links to national events when reporting on transnational developments. However, in contrast to Austria and Germany, the interviewed Danish journalists do not consider their own nation to be a natural element of the transnational sphere. On the contrary, by not explicitly placing their country in a transnational context, Danish journalists aim to convey an attitude of detachment.

In France, the journalistic practice of transnational contextualization explicitly builds links to national contexts. Thus, French journalists tend to emphasize France’s role in the transnational sphere, while at the same time portraying national politics as being increasingly difficult to understand without reference to the transnational sphere: ‘It is clear that all considera-tions, all debates, all reforms in France constitute an echo of what is going on in other countries’ (EU editor, Le Monde).

Like Austria and Germany, journalistic practices in the United Kingdom are characterized by implicit links to national contexts. Thus, transnational political affairs are often reported on without explicitly stressing the inher-ent British role. As the interviewees state, they regard international news as a quality feature that makes readers feel that they are part of a transnational community. In Poland, we find strong explicit references to national con-texts when reporting on transnational developments. Consequently, Polish journalists tend to emphasize the Polish role in transnational contexts.

All in all, distinguishing between explicit and implicit links to national contexts in journalistic practices of reporting on transnational developments helps us to better understand differences in national patterns. Whereas the implicit links used by Austrian and German journalists indicate openness towards Europe and the wider world and a straightforward approach to positioning one’s country in a transnational environment, in Denmark the absence of such explicit links points to a nation that wants to dissociate itself from transnational environments. In France and Poland, however, we find journalists who position their own country explicitly in transnational contexts. Whereas French journalists aim to portray France as being part and parcel of the transnational sphere, Polish journalists emphasize the active Polish role and Poland as a driving force in transnational contexts.


Prioritizing the national: The nation versus Europe and the world

The journalistic practice of ‘prioritizing’ illustrates to what extent journalists place more emphasis on their own country than on Europe and the world. Hence, the term captures the relative importance that journalists attribute to national and foreign news in their everyday routines. Our analysis indicates that in our whole sample journalists tend to consider national matters to be more important than news from abroad. Nevertheless, the intensity of prior-itizing the national and of handling second priorities (Europe or the world) varies in journalists’ perceptions and practices.

In Austria, for example, prioritizing is practiced only moderately by journalists, that is to say that journalists consider foreign news to be almost as important as national news. Moreover, Austrian journalists tend to prioritize Europe over the rest of the world, since news from Brussels is not really seen as ‘foreign politics [. . .] but [as] the extension of national politics’ (editor-in-chief, Kleine Zeitung). Equally, the practices of German journal-ists are characterized by rather moderate national prioritizing and Europe is given priority over other foreign policy matters.

In Denmark, by contrast, journalistic practices are characterized by intense prioritizing of national issues. Furthermore, European issues are now ranked lower than other foreign news: ‘The more international news, the less EU news – seen over the last six years’ (editor-in-chief, Ekstra Bladet). In France, journalistic practices are marked by such prioritizing. However, like their Austrian and German colleagues, French journalists tend to rank European issues higher than they do other foreign issues. In the United Kingdom and Poland, the priority of national news is rather strongly built into the journal-ists’ daily routines. Moreover, in both countries, journalists rank news from Europe lower than other foreign news, for example, news from the United States or Russia.

To sum up, Austrian and German journalistic practices are marked by a rather moderate prioritizing of national news. In Denmark, the United Kingdom and Poland, by contrast, journalistic practices are characterized by a quite intense preference for reporting mainly national news. Regarding the second rank of priorities in journalists’ internationalist practices, our anal-ysis shows that in Germany, France and Austria, European issues outrank other foreign news, whereas in Denmark, the United Kingdom and Poland other foreign matters outrank European news.

Routinizing the transnational sphere: Europe as an integral part of national news

As a normal element of journalistic practice, ‘routinizing’ (Veralltäglichung) the transnational in the Weberian (1978) sense means that ‘Europe’ and ‘the world’ are integrated into everyday journalistic routines.7 In our news-room studies, we found that such routinizing of the transnational mainly happens regarding European but not other foreign news. This practice


results in an ‘interpenetration’ of EU-related and national news categories, such that EU news can no longer be categorized as either foreign, eco-nomic or national news. In other words, Europe becomes a commonplace, a non-foreign part of journalists’ daily practices, implying that European issues are dealt with by journalists across the board, at more and more news desks.

Summarizing our findings, the practice of routinizing the transnational, especially European issues, is rather advanced in Austria, Germany and France. So one of the French interviewees states that European issues have literally become a ‘natural part’ of his daily routines, so much so that he does not even think about it any more: ‘Every day we talk about Europe. [. . .]. It’s part of the local news’ (editor-in-chief, Le Monde). Similarly, an Austrian journalist states: ‘The question is whether to publish a European topic in the economic or the EU section, but not whether to publish it at all’ (EU editor, Die Presse).

In Denmark and Poland, however, routinizing the transnational is only weakly established in journalists’ practices. Here journalists emphasize that Europe is becoming increasingly important in their practices, but is not yet directly or completely integrated into their routines. Accordingly, reporting on the EU is regarded as an imposed obligation: ‘We report many EU issues only because we have to – as a quality paper’ (UK correspondent, Berlingske Tidende).

Journalistic practice in the United Kingdom is a special case: There is no routinizing of EU issues; journalists do not take Europe for granted in their routines. One of the British interviewees points out that he needs to fight for the inclusion of European and other foreign coverage in his newspaper: ‘I almost feel like a political activist for the foreign news desk’ (editor- in-chief, The Times).

Based on our analysis of journalists’ interviews and the observation protocols, we may answer our second research question – how can we elucidate the emergence of the forms of multiple segmentation through the re-articulation of cultural patterns by everyday activities of journalists? – in a preliminary fashion: We see an ongoing re-articulation of the nation as a reference point for journalistic practices and, again, ascertain national differences in how the news is covered (Table 8.1). This gives more detailed contours to the national segmentation of the European public sphere. However, within the parameters of this nationalization of journalistic practices, we do encounter instances of transnationalization. We may consider nationalization as a Europe-wide set of practices. Yet, we found that this set often already includes routine coverage of European issues. While the re-articulation of the nation is the main aspect of the observed journalistic practices, in many cases it nevertheless already extends to a European nation, a nation increasingly defined, shaped and influenced by the EU.

Tabl

e 8.

1 V

arie

ties

of

nat

ion

aliz

atio

n p

ract

ices

AT

DE

DK

FRU

KP

L

Nat

ion

al

embe

dd

ing

Reg

ion

al e

mbe

dd

ing,

h

isto

rica

l em

bed

din

g (E

aste

rn E

uro

pe)

Part

ial

his

tori

cal

embe

dd

ing

(N

atio

nal

Soc

iali

sm)

Nat

ion

al

embe

dd

ing

as

sel

ecti

on

crit

erio

n

Com

para

tive

em

bedd

ing

(E

U n

eigh

bour

s),

his

tori

cal

embe

dd

ing

(col

onia

lism

)

Hu

mor

ous,

sa

tiri

cal

em

bed

din

g

(EU

nei

ghbo

urs

)

His

tori

cal

embe

dd

ing

(com

mu

nis

m/

Nat

ion

al

Soci

alis

m)

Tran

snat

ion

al

con

text

ualiz

atio

nIm

plic

it n

atio

nal

re

fere

nce

(t

ran

snat

ion

aliz

atio

n)

Impl

icit

nat

ion

al

refe

ren

ce

(tra

nsn

atio

nal

izat

ion

)

Imp

lici

t n

atio

nal

re

fere

nce

(d

isso

ciat

ion

/n

atio

nal

izat

ion

)

Expl

icit

nat

ion

al

refe

ren

ce

(as

part

of

the

tran

snat

ion

al)

Imp

lici

t n

atio

nal

re

fere

nce

(as

p

art

of t

he

tran

snat

ion

al)

Exp

lici

t n

atio

nal

re

fere

nce

(a

ccen

tuat

ing

nat

ion

al r

ole)

Nat

ion

al

hie

rarc

hiz

atio

nN

atio

n, E

uro

pe,

w

orld

Nat

ion

, Eu

rop

e,

wor

ldN

atio

n, w

orld

, Eu

rop

eN

atio

n, E

uro

pe,

w

orld

Nat

ion

, wor

ld,

Euro

pe

Nat

ion

, wor

ld,

Euro

pe

Tran

snat

ion

al

ritu

aliz

atio

nA

dva

nce

dA

dva

nce

dPa

rtia

lly

pre

sen

tA

dva

nce

dN

ot p

rese

nt

Part

iall

y p

rese

nt


Transnational segmentation: Addressing audiences, or who do journalists write for?

To answer our second research question, we have to keep in mind that besides national differences in nationalization patterns, journalistic practices differ by newspaper type. In our study, we distinguished different kinds of newspapers by the way journalists address their imagined audiences. In order to shed light on the second, outlet-type-related segmentation of the European public sphere, we analysed our empirical data to find transnational similarities in the ways journalists tailor their articles to suit their readership. We were able to identify four primary ways in which journalists tailor their writing. These ways go beyond the simple distinction between quality and tabloid papers.

Our analysis relied on five key identifiers that elucidate the rationale behind journalists’ EU and foreign news coverage, bearing their readership in mind. The five identifiers were developed in an open coding process in accordance with grounded theory. They are (1) the journalist’s assessment of her readership, (2) the journalist’s self-assessment, (3) the importance the journalist ascribes to the EU, (4) the importance the journalist ascribes to other European countries and (5) the journalist’s ‘nationalization practices’. From theses five identifiers, we distil four types of journalists, distinguished by the way they relate to their audiences: the analyst, the ambassador,8 the caterer and the reporter.

The analyst

The journalists typical for Die Presse (AT), Der Standard (AT), FAZ (DE), SZ (DE), Le Monde (FR), Le Figaro (FR), Rzeczpospolita (PL) and – in part – The Times (UK) may be characterized as analysts. The practices of these journalists highlight the importance of a discerning, extensive and in-depth analysis of political processes. They consider differentiated, profound and diverse EU and foreign country coverage to be a key requirement of their daily journalist routine. The analyst’s imagined readers may be stylized as the ‘well-educated elite’.

As one journalist puts it: ‘We have an educational mandate, at least towards the elites’ (EU correspondent, FAZ). It is not surprising that analysts perceive their professional specialization and their own in-depth interests as being significant. They want to ‘sell’ arguments and, therefore, they prop up the importance of constantly keeping track of relevant and complex processes, presenting diverse perspectives and providing background information. Structural restraints such as limited economic resources, space or time and limitations in the readers’ knowledge of EU and foreign affairs do not seem to impact on this self-assessment.

Analysts describe their daily routines of EU and foreign affairs cover-age by clearly distancing themselves from other journalists who rank news


values like topicality and sensationalism first. EU and foreign affairs are characterized as ‘extremely important’ and ‘essential’ (London correspond-ent, The Times). Both Europe and the world are perceived as their natural environments in which the relevant political activities and communica-tion take place. Transnational political processes such as globalization or European integration are discussed and covered regularly. It is not surpris-ing, therefore, that analysts mainly refer to the nationalization practices of ‘routinizing the transnational’ and ‘contextualizing in the transnational’. Since they perceive the transnational political sphere as a relevant, natural arena and environment, it is plausible for them to integrate transnational references into their daily production routines. Analysts mainly ‘contex-tualize in the transnational’ implicitly – references to national events or conditions fold into an integrative perspective on transnational political processes.

The ambassador

We can typify journalists in the newsrooms of Kleine Zeitung (AT), Politiken (DK), Ouest France (FR), Le Parisien (FR) and Gazeta Wyborcza (PL) as ambassa-dors. The ambassador’s way of relating to the readership is an educational approach. Like analysts, ambassadors seek to discuss political processes and favour background analyses over topicality, breaking news and sensational-ism. Their peculiar profile relates, however, to how they highlight the impor-tance of getting close to the average readers’ nationally enclosed and locally framed everyday life. The ambassadors’ readers are people from all walks of life, simply everybody. One of the French journalists puts it as follows: ‘In comparison to Le Monde [. . .] we admittedly address a readership somehow more at the grassroots level’ (editor, Le Parisien); however, as an Austrian journalist adds, coverage is also directed to the ‘elite stratum’ (editor- in-chief, Kleine Zeitung).

Coping with the challenge of providing coherent coverage of EU and foreign affairs is typical for the ambassador’s journalism. The ambassador approaches readers by explaining political processes in their transnational political environment: ‘We simply want the people to understand what we report on. [. . .]. So, it’s in a very pedagogical manner that we try to make the world more comprehensible’ (EU and foreign editor, Le Parisien). This spe-cial mandate becomes apparent when ambassadors promote a constructive, sometimes even enthusiastic image of the EU and of the idea of European integration. They seek to convey the relevance of a news story in the reader’s daily life. In this euphoric perspective, the ambassadors do not feel obliged to follow the news agenda. They tend to report on issues as they fit with the pedagogical mission vis-à-vis the readers – for instance, building a European civil society. With regard to nationalization practices, ambassador journalists therefore emphasize national embeddedness. But they also tend to prioritize European issues over the coverage of the rest of the world.


The caterer

A third type of journalist is the caterer, who is mainly found at the Kronenzeitung (AT), Bild (DE), Ekstra Bladet (DK), Daily Express (UK), Fakt (PL) and – to some extent – The Times (UK). The caterer emphasizes fulfilling readers’ expectations, including reports on surprising or shocking topics, or on topics that can be easily related to the everyday life of people in the lower strata of society. The caterer thus imagines the reader to be someone ‘whose hand we need to take’ (EU and political editor, Bild). Especially regarding EU-related topics, the caterer addresses those ‘who are maybe not in favour of the EU, who are fighting a losing battle against constraining life condi-tions’ (editor-in-chief, Fakt). Especially in research and writing routines for EU and foreign affairs topics, the caterers are mainly concerned about being the ‘voice of the ordinary people’. They do not aim to offer elaborate analy-ses of political processes or to educate the readers. How they might provide coverage from the perspective of the reader and become the voice of ordi-nary people is an integral part of caterers’ considerations. The journalist’s appraisal of the importance of the EU is trumped by service orientation.

Reporting on the EU and other European countries is seen as much less important than issues that are nationally relevant. In some cases, foreign issues do not play a role at all. Journalists frequently point to structural con-straints such as limited space, personal resources and time. Beyond that, caterers have a hypocritical attitude towards the EU: While these journalists constantly present themselves as being in favour of the EU, they also feel obliged to provide their readers with sceptical, sometimes negative and in many cases sensationalist coverage. In the light of these characteristics, it is quite plausible that caterers strongly emphasize the journalistic practices of embedding the news nationally and prioritizing the national, flowing from their notions of the ‘powerful reader’. After all, ‘simple readers’ only deem issues relevant that they can relate to the political context they live in, namely, the national environment.

The reporter

There is a fourth, and last, type of journalist best characterized as a reporter. This type prevails among journalists working in the newsrooms of WAZ (DE), Berlingske Tidende (DK), Jyske Vestkysten (DK) and Dziennik Zachodni (PL). In their working routines, the reporters emphasize a pragmatic perspective, being subject to structural constraints like resource restrictions in researching background information on EU and foreign news issues or in writing articles. The reporter imagines the readers as average citizens without special claims to status, as ‘people without especially high education’ (journalist, Dziennik Zachodni). From a reporter’s perspective, the reader expects an overview of crucial political events and not complex, in-depth analyses of political pro-cesses. The reporter’s task is to present issues so that people can easily relate them to those local and national contexts in which their daily life unfolds.


In doing so, reporters underpin the necessity of being ‘objective’ and refrain from moralizing. Altogether, the reporter favours stories that ‘provide the people with a good experience’ (editor, Jyske Vestkysten).

Reporters assess their EU attitude as being supportive while avoiding overly enthusiastic or sceptical commitments. The attitude results from their pecu-liar reader orientation: ‘In sum, we have to be pragmatic and follow a pro-European line. [. . .]. People are not stupid and understand what the obvious advantages resulting from the European development are’ (editor, Dziennik Zachodni). This statement indicates that coverage of EU countries is only of average importance for reporters – and even less so when reporting on other European countries. Important, relevant events are covered mainly when they can be easily related to readers’ (imagined) needs. It thus becomes clear that reporters emphasize the practice of embedding the news nationally. Their pragmatic perspective results mainly from economic constraints, but it tallies with the notion of a readership that consists of average or below-average citizens who are mainly interested in news that directly affects their personal, regional and national environments.

To explain segmentation by media outlet, we argued in favour of differ-entiating types of journalists by how they tailor their writing to their read-ership, in contrast to the simpler distinction between quality and tabloid papers. Types of journalists were described in terms of profiles related to their imagined readerships and their journalistic self-assessments (Table 8.2).

Table 8.2 Transnational types of addressing newspaper audiences

Analyst Ambassador Caterer Reporter

Journalistic readers’ images

Well-educated elite citizen

Everybody ‘Ordinary’ citizen Average citizen

Journalistic self-conception

Extensive analysis of political processes

Pedagogic treatment of political processes

‘Ordinary’ citizen’s voice

Pragmatic view of political processes

Importance of/attitude towards EU

EU as relevant framework to be discussed critically

EU as complex project in need of support and explanation

Hypocritical: pro-European position/sensationalistic critique

EU as a duty, accepted as everyday reality

Importance of EU countries and world

Europe and world as self-evident framework

Europe as illustrational moment for the national

Europe as marginal resource

Europe as marginal news resource

Practices of nationalization

Transnational contextualization, transnational ritualization

National embedding, European hierarchization

National embedding, national hierarchization

National and regional embedding


When we relate the way journalists address their audiences to the distinc-tion between quality and tabloid papers, we find that the journalist types do not spread evenly across media outlet type. It is no surprise that the analyst predominates in quality papers. The caterer is typical for tabloids and the reporter for regional newspaper settings. The ambassador, interestingly, can-not be linked to a newspaper type, but rather may be encountered in all three types of newspaper – quality, tabloid and also regional.

Conclusion

Relating our empirical analyses back to our more general reflections at the beginning of the chapter, we can now establish to what extent patterns of ‘nationalization’ and the ‘modes of addressing issues’ in journalistic prac-tices help us to understand why we are confronted with a multiply segmented European public sphere. We encounter more or less stable national patterns in journalistic work, but we also find patterns related to certain media outlet types and ways of addressing audiences. While the first kind of patterning explains the more or less stable national segmentation of the articulation of a European public sphere, the second kind explains why there also is a transnational segmentation.

As we have argued, these differences are best understood as outcomes of certain ‘cultures of political discourse’, that is, as deeply anchored cultural patterns that shape the discourses of political communication that journal-ists produce. Reflecting on our empirical results, we may conclude that polit-ical discourse cultures are relevant for explanations in at least three ways:

• First, we substantiated the relative stability of national political discourse cultures, especially in relation to the journalists’ practices of nationalization. The nation is not only itself a main reference point of journalists’ work, but, in addition, we find differences across countries in how nationalization is articulated. Journalists basically act within the boundaries of their national political discourse cultures and in turn continuously re-articulate them.

• Second, we identified outlet-type-related political discourse cultures. There are specific patterns of political discourse cultures that criss-cross national political discourse cultures and are more strongly related to the type of newspaper than to the nation of origin. This helps us to understand the segmentation of the European public sphere across countries. There might, however, be a variety of other reasons for the transnational similarities of outlet-type-related patterns in producing political discourse. Empirically, it may well be an endless undertaking to describe the whole spectrum of relevant driving forces,9 but one major point became clear in our study: Differences in European political discourse cultures are not necessarily national, even though the national perspective still dominates in Europe.


• Third and last, we gained an impression of what might be an emerg-ing European political discourse culture, insofar as we identified rudi-mentary cultural patterns in journalistic practices that criss-cross all nations and outlets. Basically, everyday activities of most journalists are marked by a fundamental acceptance of the EU as a shared horizon of meaning in all political media coverage; this horizon is not replac-ing the nation but transcending and possibly overlaying it. Also, the fundamental forms of nationalization in journalistic practices are com-mon across Europe: ‘embedding the national’, ‘contextualizing in the transnational’, ‘prioritizing the national’ and ‘routinizing the transna-tional’ are, related to Europe, typical for media coverage across all the countries studied.

We may consider these practices to be the functioning building blocks of a common European culture of political discourse. Certainly, this culture is much less distinct than are the national political discourse cultures, and also less distinct and less conspicuous than are the outlet-type-related discourse cultures. If we were to venture beyond Europe, the quality of these cultural patterns could be highlighted and understood even better if we compared them with other transnational cultural patterns of political discourse, for example in North or Latin America.10

However, if we acknowledge in a first step that these shared patterns are building blocks of a European political discourse culture, we get closer to understanding why there is – opposing and segmenting forces notwith-standing – no decline in the European public sphere. If we link this insight back to the fundamental questions discussed at the start of the chapter, we can add an important point to the discussion: Considering the journalistic practices as well as newspaper content, we may find that ‘nationalization’ and ‘transnationalization’ do not contradict but complement each other. That said, it might be useful to conceptualize the legitimation of the EU as also taking place in the discourse of ‘monitoring Brussels from a national perspective’, as long as the EU and the ‘trans’ perspective is considered to be, in some way, a legitimate horizon of the national, the ‘intra’, the ‘non-trans’ perspective.

Notes

1 Each of the three dimensions was analysed using two indicators. For a more thor-ough discussion of the methods, see Wessler et al. (2008); Kleinen-von Königslöw (2010); Hepp et al. (2012).

2 Our newspaper sample for the content analysis consists of Die Presse, Neue Kronenzeitung (Austria/AT); Politiken, Ekstra Bladet (Denmark/DK); Frankfurter Allgemeine Zeitung, Bild (Germany/DE); Le Monde, Le Parisien/Aujourd’hui en France (France/FR); The Times, The Sun (United Kingdom/UK); and Gazeta Wyborcza, Super Express (Poland/PL).


3 The relative position of each newspaper in the two dimensions of Europeanization was determined by calculating for the whole time period (1982–2008): first, how much each newspaper deviates from the mean across all analysed newspapers for a particular indicator; second, the mean of the two indicators for each dimen-sion of Europeanization for each newspaper. For example, the share of articles monitoring EU institutions in Die Presse is ten per cent higher than the mean across all newspapers (13 per cent), and the share of articles focusing on EU politics is 0.3 per cent higher than the mean (three per cent). Taking the average of both indicators for the vertical dimension of Europeanization, Die Presse is thus five per cent above the mean for all newspapers. The dimension of collec-tive identification was excluded from Figure 8.2 because the number of cases for tabloids was too small.

4 See also Brüggemann and Kleinen-von Königslöw (2009, 31).5 Our newsroom newspaper sample consists of Die Presse, Der Standard, Kleine Zeitung,

Neue Kronenzeitung (Austria/AT); Politiken, Berlingske Tidende, Jyske Vestkysten, Ekstra Bladet (Denmark/DK); Frankfurter Allgemeine Zeitung, Süddeutsche Zeitung, Westdeutsche Allgemeine Zeitung, Bild (Germany/DE); Le Monde, Le Figaro, Ouest France, Le Parisien/Aujourd’hui en France (France/FR); The Times, Manchester Evening News, Daily Express (United Kingdom/UK); and Gazeta Wyborcza, Rzeczpospolita, Dziennik Zachodni, Fakt (Poland/PL).

6 See Thorsten Quandt (2008) for reflections on the approach of newsroom observation and Ulf Hannerz (2004) for a general ethnographic approach to the study of foreign correspondents.

7 We had to choose between ‘routinization’ and ‘ritualization’. ‘Ritualization’ might be misleading if one understands it as ‘becoming a ritual’ in the narrow sense of the word (Turner 1995). As ‘routinization’ is one of the established translations of Veralltäglichung in the Weberian sense, we relied on it for practical reasons.

8 The term ‘ambassador’ was first introduced by Heikki Heikkilä and Risto Kunelius (2006). However, they define the term as a form of journalistic coverage, while we use it to describe a certain form of interaction with the public.

9 The shared economizing trend of journalism in Europe and beyond might be one such driving force that results in different ‘transnational models’ of organizing journalism and in related segmenting forces (Henningham and Delano 1998; McMane 1998; Oledzki 1998; Weischenberg et al. 1998; Reese 2008). In this sense Néstor García Canclini (2001, 120) also characterizes the ‘segmentation of publics’ as ‘the most salient feature in the restructuring of the market’. But the main driving forces distinguished in Figure 8.1 – globalization, technologi-cal change and value change across European countries – might also result in a limited number of ‘ways’ of handling them in journalistic practices.

10 There is evidence for a Latin American political discourse culture, as suggested by the comparison between Europe and Latin America presented by Néstor García Canclini (2001, 97–109).

167

9Internationalization and the Discursive Legitimation of the Democratic Nation StateSebastian Haunss, Henning Schmidtke and Steffen Schneider

The literature on globalization and the democratic nation state is dominated by a crisis diagnosis that holds economic and political internationaliza-tion responsible for the waning state capacity in recent decades (Keohane and Milner 1996; Kahler and Lake 2009). Bypassed by global networks of wealth, power and information, the state is arguably losing its sovereignty, hollowed out and no longer able to assume its core responsibilities. This development – which is presumably ‘voiding of meaning and function the institutions of the industrial era’ (Castells 2004, 419) and the representative institutions of liberal democracies – has also ushered in a crisis of legitimacy according to pessimistic observers. While others are more sanguine about the erosion of state power (Rieger and Leibfried 2003; Leibfried and Zürn 2006) and legitimacy (Majone 2001a; Moravcsik 2005; Schneider et al. 2010), there is widespread agreement that the democratic nation state is no longer the only relevant player in a globalized and interdependent world (Zürn 1998; Albrow 2003; Hurrelmann et al. 2007). It is therefore indeed plausi-ble to surmise that the growing prominence of international organizations and regimes in the evolving ‘ post-national constellation’ (Habermas 2001) affects the degree and foundations of state legitimacy.

Nowhere does the alleged link between internationalization and state legitimacy appear more plausible than in the context of European integra-tion, which entails unprecedented shifts of power and responsibilities from the national to the supranational level. As a consequence, the congruence of demos, territory and political authority that prevailed during the ‘Golden Age’ of the democratic nation state has arguably unravelled even further in the European Union (EU) than in any of the other OECD member states, diminishing the autonomy of national political regimes and raising doubts about the sources of their legitimacy (Scharpf 1999, 2000; Føllesdal and Hix 2006).

However, the causal mechanisms that link internationalization with chang-ing perceptions and evaluations of legitimacy remain underexplored. While there are plausible normative accounts of internationalization effects on the

168 Internationalization and the Legitimation of the State

democratic nation state and its legitimacy, empirical perspectives on the link between internationalization and legitimacy are few and far between. Our objective in this chapter is to probe the claim that internationalization has led to an erosion of regime support in the established OECD democracies. The chapter draws on a content analysis of legitimation discourses in the quality press of two EU member states (Germany and the United Kingdom) and two non-EU democracies (Switzerland and the United States) over a ten-year period (1998–2007).

We begin by outlining our understanding of legitimacy as an empirical concept in a discourse-analytical perspective. Three hypotheses about the effects of internationalization on the legitimacy of the democratic nation state, gleaned from the extant literature, are then presented, followed by an outline of our research design, text analytical method and data. The main section of the chapter is devoted to our empirical findings. The analysis of legitimation discourses suggests that internationalization has no uniform effect on the ascription or denial of legitimacy in the public spheres of the four countries examined, and hence it does not contribute to a general decline of state legitimacy.

Legitimacy and legitimation: A discourse-analytical perspective

A political regime is legitimate if it meets certain standards of acceptability (Beetham 1991; Hurrelmann et al. 2007, 3). While the ‘diagnostic’ (Peters 2005, 99–100) perspective on legitimacy evaluates this acceptability based on the researcher’s own normative yardsticks, empirical legitimacy research considers legitimacy claims and assessments, as well as the normative criteria that underpin them, as social facts (Barker 2001; Reus-Smit 2007). Here we follow the second, empirical approach.

Understood in this empirical vein, legitimacy cannot be viewed as a quasi-objective attribute of political regimes. Rather, it is socially constructed in public spheres and political communication, (re-)produced – or withdrawn and transformed – in an interactive process in which citizens evaluate the normatively grounded legitimacy claims of political elites, accepting or contesting them based on their own legitimation criteria. This process takes place in various discursive arenas and employs characteristic practices (Luckmann 1987; Raufer 2005).

Following Easton (1965, 1975), we maintain that legitimacy claims and assessments relate primarily to the regime level of political communities and systems (as opposed to Easton’s ‘authorities’ and individual policies), and that they are the key sources of ‘diffuse’ (as opposed to ‘specific’) support. This type of support is based on moral or other normatively grounded judgements about, for instance, the democratic quality, legality or effective-ness of political systems and their institutions. The study of legitimation

Sebastian Haunss, Henning Schmidtke and Steffen Schneider 169

discourses in public spheres gives us direct access to the practices and nor-mative foundations that underpin the (de-)legitimation of the democratic nation state (Hurrelmann et al. 2009; Schmidtke and Schneider 2012; Haunss and Schneider 2013).

Internationalization and legitimation processes

The classic literature on political legitimacy did not look much beyond the nation state (Luhmann 1969; Habermas 1973; Weber 1978). More recently, however, internationalization has featured prominently in studies that diag-nose an erosion of legitimacy caused by the growing inability of national institutions to cope with problems of global reach, to assert authority over transnational private actors and to retain sovereignty or democratic quality while new ‘spheres of authority’ beyond the state gain power and impor-tance, bypassing established state institutions (Zürn 2000, 2004; Rosenau 2002). In the following section, we sum up the main arguments and develop a set of empirically testable hypotheses.

Erosion of state legitimacy

The diagnosis of an erosion of legitimacy is grounded in the observation that states have become more interdependent over the past few decades (Keohane and Nye 1977; Held 1995; Zürn 1998). Societal denationalization – understood as processes in which economic, cultural and other social trans-actions increasingly transcend national borders – has led to an incongruence between the constituencies of national democratic governments and the populations affected by their decisions. Thus, the capacity of national governments to bring about desired social outcomes is challenged. These processes of societal denationalization are also expected to threaten the legitimacy of political orders because they challenge the idea of national sov-ereignty and the principle of the congruence of representation, and because they undermine the ability of the democratic nation state to achieve the purposes that matter to its citizens (Scharpf 2000, 107). This mechanism is arguably most pronounced in the EU, where, through the gradual removal of physical, technical and fiscal barriers to trade, market integration has greatly diminished the capacity of national governments to achieve traditional state objectives such as welfare and security (Leibfried 2000; Kriesi et al. 2008, 3).

This challenge has not gone unnoticed by political elites, who respond by establishing new international regimes or widening the scope and author-ity of existing ones (Cooper et al. 2008; Zürn et al. 2012). The initial aim of political denationalization – understood as the transfer of political authority from the national to the international level – was to restore the state capac-ity to act in a globalized world and to provide governments with means to achieve goals such as regulating the international economy, slowing down global warming or combating terrorism (Keohane et al. 2009, 4).


However, Robert Dahl (1999) and many others argue that these processes challenge the legitimacy of national democracies. The migration of politi-cal decision-making authority to international regimes that are inherently bureaucratic and lack the participation of ordinary citizens undermines pop-ular sovereignty and the parliamentary accountability of national political institutions, and hence their democratic legitimacy. International regimes enable political elites to bypass national parliaments and the often cumber-some mechanisms through which citizens hold political elites accountable. Therefore, they pose a threat to the functioning of national democracies, weaken popular rule and empower special interests that undermine majori-tarian preferences (Gartzke and Naoi 2011, 590).

Again, this mechanism is arguably most pronounced in the context of European integration, where the ‘creeping’ takeover of responsibilities in many relevant issue areas by European supranational institutions has even led to their deep involvement in core state powers such as internal security, taxation or welfare spending (Pollack 1994; Genschel and Jachtenfuchs 2013). In sum, all of this suggests that the age of globalization is a serious threat to the legitimacy of the democratic nation state. Hence, we may expect inter-nationalization processes to erode the legitimacy of national political orders:

H1: The more a country is exposed to internationalization processes, the more negative assessments of its legitimacy will become.

More specifically, as European integration is presumably the most conse-quential process of internationalization, we expect a country’s degree of integration into the EU to matter most. Finally, the effect may be expected to intensify over time as European integration deepens.

Transformation of state legitimacy

While the literature often assumes a general erosion of democratic legiti-macy as a consequence of internationalization, some authors suggest that not all institutions and aspects of democratic political systems may suffer equally from internationalization. Fritz Scharpf’s theoretical distinction between input and output legitimacy (Scharpf 1999, Chapter 1) is relevant here. While the former strongly depends on self-determination and direct representation of the sovereign people within the territorial boundaries of a democratic nation state, output legitimacy relates mainly to a govern-ment’s ability to secure welfare and provide optimal solutions for problems at hand. Linking this distinction with the notion of democratic quality, one may distinguish between genuinely democratic forms of input and output legitimacy and those forms of input and output legitimacy that are inde-pendent from the notion of democracy, for instance, effectiveness or effi-ciency as non-democratic aspects of output legitimacy (see Schneider et al. 2010, Chapter 4).


If we follow the arguments put forward in the literature, internationali-zation and especially European integration should be expected to affect a nation state’s ability to secure input legitimacy more strongly than its capa-bility to produce satisfactory outputs for its population (Scharpf 1999, 2000). This applies especially to the genuinely democratic aspects of input legiti-macy. National parliaments suffer most from the shift of certain responsi-bilities from the national to the international level, losing their ability to democratically represent citizens at the polity level where the relevant deci-sions are taken (Kaiser 1971, 715; Andersen and Burns 1996; Auel and Benz 2007). Hence, we expect internationalization processes to trigger particularly negative evaluations of the democratic input dimension of legitimacy.

H2: The more a country is exposed to internationalization processes, the more negative assessments of its democratic input legitimacy will become.

Again, the effect is presumably strongest in EU member states, and the deep-ening of European integration should lead to a decline of democratic input legitimacy over time.

Internationalization as a discursive phenomenon

From a normative observer’s perspective, the case for the effects of internationalization on the legitimacy of the democratic nation state (as suggested in hypotheses 1 and 2) appears plausible enough. In an empirical perspective, however, we need to specify the causal mechanisms that link internationalization and legitimacy. Taking the notion of discursive construction seriously, we argue that internationalization can only plausibly affect legitimacy if the processes that undermine state capacity and create legitimacy challenges are important topics and communicative frames in legitimation discourses. In short, following the constructivist argument that speech may change people’s perceptions of social facts (Finnemore and Sikkink 2001, 402), we consider internationalization as a (partly) discursive phenomenon, a communicative frame that links social, political and eco-nomic developments and might also mobilize legitimacy perceptions (Hay and Rosamond 2002, 151). The degree to which states are internationalized may, for instance, be exaggerated or played down in public discourses. Yet, if internationalization matters discursively, we can expect related events and developments to be the background against which the legitimacy of the state is discussed ever more frequently:

H3a: The more a country is exposed to internationalization processes, the more salient frames of internationalization will become.

Again, this appears plausible particularly for EU member states, and European integration may be thought to translate into a higher incidence


of internationalization frames over time (Wessler et al. 2008). The erosion of state legitimacy presumably induced by internationalization may therefore be a function of the discursive presence of internationalization. The inter-nationalization frame – just like the ‘objective’ degree of a national polity’s internationalization – may be expected to have a negative effect on regime support:

H3b: The more assessments of legitimacy are framed in terms of interna-tionalization, the more negative these assessments will become.

Research design, method and data

Legitimation discourses – the focus of our study – take place in different arenas. However, given the role of the media as an interface and gatekeeper between citizens and political elites in democratic mass societies, a focus on media discourses is warranted (Peters 2005; Habermas 2009b). Here we con-sider legitimation discourses in the quality press of four established OECD democracies over a ten-year period (1998–2007): Germany (Frankfurter Allgemeine Zeitung, Süddeutsche Zeitung), the United Kingdom (Guardian, Times), Switzerland (Neue Zürcher Zeitung, Tagesanzeiger) and the United States (New York Times, Washington Post). While this newspaper sample argu-ably reflects elite discourses and mainstream positions, we also submit – in line with other recent work on public spheres (Koopmans and Statham 2010; Risse 2010) – that the quality press continues to play a key role as an opinion leader in shaping citizens’ perceptions of legitimacy.

Conventional indicators of globalization such as the KOF index consist-ently rank the established OECD democracies – the focus of our empirical study – as the countries with the highest levels of economic and political internationalization (Dreher et al. 2008). While the KOF index and simi-lar quantitative indicators are thus helpful to distinguish internationali-zation levels among countries with widely varying societal and economic backgrounds, they do not adequately capture qualitative differences among OECD states or changes in these countries over time.1 For instance, they count EU membership simply as one additional membership in interna-tional organizations and do not account for the qualitative changes brought about by European integration, which has a particularly strong, albeit vary-ing impact on national political systems (Leuffen et al. 2013).

Because European integration is arguably the most consequential exam-ple of political internationalization, we focus on this process. Our coun-try sample maximizes variation with regard to the Europeanization of national politics: (a) Germany is a founding member of the EU (1957) and has never opted out of any significant integration step (Katzenstein 1997; Bulmer and Paterson 2010), (b) the United Kingdom represents a relatively late (1973), much less enthusiastic participant of European integration


that has not joined the Schengen Agreement or the Monetary Union and can therefore be considered less internationalized in this respect than Germany, (c) Switzerland is not an EU member but adopts a consider-able share of EU legislation via two sets of bilateral treaties or unilaterally (Kriesi and Treschel 2008, 172–89) and (d) the United States is, of course, neither a member of the EU nor subject to its legislation, and its overall level of political internationalization may be characterized as much lower than that of the other three countries, simply due to its size and super-power status.

A similar logic underpins our choice of a time frame. While conven-tional quantitative indicators reveal hardly any trend in the 1998–2007 period, these ten years cover an important period of EU expansion and deepening (Clark and Rohrschneider 2009; Hooghe and Marks 2009, 646). The time frame ranges from the year after the Amsterdam Treaty had been signed to the year in which the Lisbon Treaty was signed. Moreover, the introduction of the euro as a common currency (2001), the Treaty of Nice (2003) and the Eastern enlargement of the EU (2004, 2007) were impor-tant events in our period of observation. The two most significant sets of bilateral agreements between the EU and Switzerland were also signed and enacted in this time period (Bilateral I in 1998 and Bilateral II in 2004). With the exception of the United States – which has not been exposed to a comparable development, its NAFTA membership notwithstanding – our sample countries thus have all experienced rising levels of political inter-nationalization over time.

Newspaper articles were sampled using a strategy of relevance or intensity sampling (Krippendorff 2004, 118).2 For each country and year, we chose ten-day sampling periods which were placed around recurring events that presumably focus media attention on national political regimes and institu-tions, their functioning and their legitimacy (see Table 9.1 for details on the time windows).3 The basic units of analysis are individual propositions in the selected articles that evaluate the legitimacy of the four national politi-cal regimes or their core elements – that is, legitimation statements. These propositions were identified and coded with the help of a stylized legitima-tion ‘grammar’ (Table 9.2; details on text retrieval and the coding procedure are found in Schmidtke and Nullmeier 2011). Four key variables describe a legitimation statement: the legitimation object that is assessed, the posi-tive (legitimating) or negative (delegitimating) character of the assessment, the legitimation criterion (normative benchmark) on which the statement is based and the speaker.

In addition, we coded whether or not a statement explicitly refers to internationalization, notably including Europeanization. Such a reference was coded when a statement links an evaluation of a legitimation object at the national level and (a) societal internationalization processes such as the growing volume and density of cross-border migration and economic


Tabl

e 9.

1 Ti

me

win

dow

s an

d n

um

bers

of

legi

tim

atio

n s

tate

men

ts

Yea

r

CH

DE

GB

US

arti

cles

stat

emen

tsar

ticl

esst

atem

ents

arti

cles

stat

emen

tsar

ticl

esst

atem

ents

1998

2768

4010

647

120

3198

(05/

12–1

6/12

)(0

7/11

–18/

11)

(21/

11–0

2/12

)(2

4/01

–04/

02)

1999

1245

3990

4514

557

184

(11/

12–2

2/12

)(2

0/11

–01/

12)

(13/

11–2

4/11

)(1

6/01

–27/

01)

2000

1858

2746

5219

243

98(0

9/12

–20/

12)

(25/

11–0

6/12

)(0

2/12

–13/

12)

(22/

01–0

2/02

)20

0118

3624

5350

158

1630

(01/

12–1

2/12

)(2

4/11

–05/

12)

(16/

06–2

7/06

)(2

7/01

–07/

02)

2002

2763

3384

4392

4694

(23/

11–0

4/12

)(3

0/11

–11/

12)

(09/

11–2

0/11

)(2

6/01

–06/

02)

2003

2574

3010

238

8782

200

(29/

11–1

0/12

)(2

2/11

–03/

12)

(22/

11–0

3/12

)(2

5/01

–05/

02)

2004

4410

448

115

3989

5217

3(2

7/11

–08/

12)

(20/

11–0

1/12

)(2

0/11

–01/

12)

(17/

01–2

8/01

)20

0515

2327

8245

9055

124

(26/

11–0

7/12

)(2

6/11

–07/

12)

(14/

05–2

5/05

)(2

9/01

–09/

02)

2006

2051

2544

3269

7114

8(0

9/12

–20/

12)

(18/

11–2

9/11

)(1

1/11

–22/

11)

(28/

01–0

8/02

)20

0722

8119

3041

9142

84(0

1/12

–12/

12)

(24/

11–0

5/12

)(0

3/11

–14/

11)

(20/

01–3

1/01

)∑

228

603

312

752

432

1,13

349

51,

233


interactions, or (b) transfers of political authority to international organiza-tions, regimes and networks governed by formal international agreements; the internationalization reference had to be placed in the same paragraph as the legitimation statement. An example for such an internationaliza-tion reference is the following statement: ‘The idea that corporations rule the world has led many critics of globalisation to conclude that the State has become a feeble institution and that democracy is in peril’ (Times, 28 November 2003). As shown in Table 9.1, 1,473 articles containing one legit-imation statement or more were retrieved from the eight newspapers; a total of 3,721 legitimation statements were identified in these articles and coded.

Empirical results

How legitimate are the four political systems? Has the transfer of political authority to international regimes led to a pervasive erosion of discursive support for the democratic nation state and its core institutions? To provide answers to these questions, we discuss the three hypotheses in the light of our empirical evidence.

Erosion of state legitimacy?

In order to examine whether internationalization processes have eroded the legitimacy of national political systems in the four public spheres (H1), we calculated the surplus or deficit of positive assessments (in percentage points) for each country and year. These legitimacy levels range from −1 (all statements are delegitimating) to 1 (all are legitimating).

Figures 9.1 and 9.2 demonstrate that the reality is more complex than the erosion scenario would suggest. Considering, first, the overall distribu-tion of positive and negative legitimation statements per country, we do not observe low legitimacy levels across the board, which would have indicated

Table 9.2 Legitimation grammar and examples

Example 1: The Liberal Democrat leader [Paddy Ashdown] told a rally in Eastbourne that the system was now so [. . .] inefficient and secretive that it no longer served the citizen. He said: ‘Next Tuesday you could elect [. . .] 650 saints; but it wouldn’t make any difference if our system no longer works’ (Times, 3 April 1992).

Paddy Ashdown says:

Britain’s political system . . .

is illegitimate . . . because it is . . . (1) inefficient;(2) intransparent.

Example 2: The people and their representatives have been sent to the sidelines by the courts, and that’s not right (Washington Post, 6 February 2004).

The Washington Post says:

The US judiciary . . .

is illegitimate . . . because . . . it undermines popular sovereignty.


Figure 9.2 Legitimacy levels per country over time

UKUS

CHDE

Treaty of AmsterdamBilateral Agreements I Euro

Treatyof Nice

EU25EU27Constitutional Treaty

Treaty of LisbonBilateral Agreements II

a substantial erosion of support for the democratic nation state. Moreover, differences in the ranking of national legitimacy levels are not exactly in line with different levels of internationalization. Among our four countries, the erosion of legitimacy was expected to be strongest in Germany, a core member of the EU, not quite as strong in the United Kingdom, which opted out of the Schengen Agreement and the Monetary Union, and even weaker in Switzerland and the United States. There is indeed a surplus of positive statements in the Swiss (legitimacy level: 0.10) and US (0.08) discourses, and a deficit in the German (−0.28) and UK (−0.53) discourses.

Thus the two non-EU states, Switzerland and the United States, have mod-erately positive and essentially the same legitimacy levels while evaluations of the legitimacy of the EU member states, Germany and the United Kingdom, are predominantly negative. The finding suggests that European integration might indeed affect legitimacy evaluations more than other, less pronounced forms of political internationalization. However, the legitimacy levels do not

CH0.10

DE–0.28

UK–0.53

US0.08

deleg.

leg.

272(45.1%)

331(54.9%)

270(35.9%)

267(23.6%)

666(54.0%)

482(64.1%)

866(76.4%)

567(46.0%)

Figure 9.1 Positive and negative assessments by country (N, legitimacy levels)


reflect the varying degrees of European integration. Interestingly, the United Kingdom rather than Germany has the lowest legitimacy level. If we factor in the presumably negative bias of media reporting and commentary, our data do not support the notion of an across-the-board erosion of the legitimacy of the democratic nation state caused by internationalization processes. The thrust of legitimation discourses is even positive in two national public spheres, overall legitimacy levels vary widely, and factors other than the United Kingdom’s degree of internationalization must account for the particularly low value of that country.

A glance at developments over time confirms that the hypothesis of an erosion of legitimacy driven by internationalization needs to be qualified. Only in two years (2002 and 2006) is the ranking of legitimacy levels in line with the hypothesis that the degree of internationalization – with Germany at the top, followed by the United Kingdom, Switzerland and the United States – is inversely related to discursive support. In the remaining eight years, the positions of at least two countries do not correspond to their anticipated rank. The national legitimacy levels are even less in line with the country ranking of the KOF index: Not a single year yields a legitimacy ranking with the United States at the top, followed by Germany, the United Kingdom and Switzerland.

Even though no clear trend emerges from our analysis of legitimacy levels, European integration might still play a role in the legitimation discourses of its member states. If there is no downward trend in legitimacy levels, then perhaps major events of the European integration process impact on discourses in the years in which they occurred. For Germany, one may then expect a drop in legitimacy levels in 1999 (when the Treaty of Amsterdam entered into force), in 2002 (when the euro was introduced as a cash cur-rency), in 2003 (when the Treaty of Nice entered into force), in 2004 (when the Constitutional Treaty was signed and the major wave of Eastern enlarge-ment took place) and in 2007 (when the Treaty of Lisbon was signed and Bulgaria and Romania joined the EU). Except for the impact of the intro-duction of the euro, the same may be expected for the UK case. The Swiss discourse might reveal downturns of legitimacy levels in 1999, 2000, 2004 and 2005 when the Bilateral Agreements I and II with the EU were signed and subjected to referenda.

Yet while Figure 9.2 shows that legitimacy levels vary over time, annual fluctuations are not consistent with such expectations. Fluctuations are strongest in Germany and Switzerland, where legitimacy levels have ranges of 1.07 and 1.00, respectively. In the United States, legitimacy levels vary between −0.26 and 0.50 (range = 0.76), while in the United Kingdom legiti-macy levels are consistently negative (range = 0.60).

As regards the expected declines in the years in which European inte-gration was deepened or the EU enlarged, we get ambiguous results for all three European countries. In the German discourse, legitimacy levels partly


correspond to expectations, as they decreased in 1999 and 2002. However, the same is not true for the second part of the observation period. In 2003, 2004 and 2007, legitimacy levels even increase quite considerably, with 2007 displaying the second highest value in the entire ten-year period. For the United Kingdom, our data contradict expectations completely, because progress in European integration is invariably accompanied by increasing legitimacy levels. In the UK discourse, all relevant years (1999, 2003, 2004 and 2007) are characterized by above-average legitimacy levels; 2004 and 2007 even rank first and second. Finally, the years in which the Swiss–EU Bilateral Agreements were signed and subjected to referenda display increas-ing legitimacy levels with the exception of 2005. Only in 2005, when parts of Bilateral II on internal security (Schengen) and asylum (Dublin) as well as the extension of Bilateral I to the new EU member states were put to suc-cessful optional referenda, the level of legitimation decreased and fell below average. By contrast, values for the remaining years are around or even above the average; in 2000, when the complete set of agreements under Bilateral I was subjected to a successful optional referendum, the level of legitimation even increased to the second highest value in the period of analysis.

In sum, the erosion hypothesis (H1) cannot be confirmed in the light of empirical evidence on overall levels of legitimacy or developments over time. Contrary to the hypothesis that the legitimacy of the nation state is subject to the uniformly negative impact of internationalization processes and espe-cially the process of European integration, national legitimacy levels do not decrease over time but follow country-specific patterns that are often not synchronized with the growing centralization of power and responsibilities in the EU. Considering the entire ten-year period examined here, we observe marked ups and downs, but overall legitimacy levels hardly indicate a crisis in three of the four countries. As for the UK exception, a link with interna-tionalization appears implausible. In short, if internationalization influences the evaluation of the legitimacy of national political orders at all, the effect is too small to show up in legitimacy levels.

Transformation of state legitimacy?

The results so far indicate that internationalization does not generally affect legitimation discourses negatively. But as our second hypothesis suggests, the erosion of legitimacy might not be a uniform process, and might only affect some aspects of the democratic nation state. In particular, internation-alization at large and the process of European integration with its transfer of power from the national to the European level might only affect evaluations of democratic input legitimacy negatively while leaving assessments based on output criteria untouched (H2).

To address the second hypothesis, we calculate the legitimacy levels of all legitimation statements that use democratic input criteria for each country and year, and contrast them with the corresponding values of statements


that refer to non-democratic or output criteria. Statements in the category of democratic input legitimacy refer to popular sovereignty, participation, deliberation, transparency, accountability, legality and credibility – core aspects of democratic representation and decision-making that seem to be particularly threatened by transfers of power and decision-making authority from national legislative institutions to bargaining networks and executive institutions at the international level.

Figure 9.3 plots the legitimacy levels of statements using democratic input criteria and of statements drawing on other criteria for each country over time. At first glance, the figure seems to confirm the expectation that the four nation states are consistently evaluated more negatively with respect to democratic input criteria than to the other criteria. This is because the legiti-macy levels of the four political systems are lower when these evaluations refer to aspects of democratic input legitimacy than when they refer to other criteria. The democratic quality of the four countries is thus evaluated more negatively than their ability to produce satisfactory policy outputs.

However, a closer inspection of the data reveals that this surplus of negative evaluations of democratic input legitimacy is not spurred by internationalization. In fact, Figure 9.3 shows only two years (1999 and 2002) in which the country ranking of input legitimacy levels corresponds to the ranking in terms of internationalization levels. Apparently, a country’s relative level of democratic input legitimacy is not related to its level of inter-nationalization. Moreover, and in line with findings for the overall legitimacy levels, the levels of democratic input legitimacy in Switzerland, Germany and the United States strongly fluctuate over time, with ranges of 1.30 (CH), 1.27 (DE) and 1.22 (US). The United Kingdom shows less fluctuation, with a range of 0.31 and levels between −0.93 and −0.62. Admittedly, adding a

Figure 9.3 Legitimacy levels of democratic input and other criteria over time

−1.0

−0.5

0.0

0.5

1.0Switzerland

1998 2000 2002 2004 2006

−1.0

−0.5

0.0

0.5

1.0Germany

1998 2000 2002 2004 2006

−1.0

−0.5

0.0

0.5

1.0United Kingdom

1998 2000 2002 2004 2006

−1.0

−0.5

0.0

0.5

1.0United States

Democratic inputOther

1998 2000 2002 2004 2006


trend line to the plots suggests a negative trend for Germany and slightly positive trends for Switzerland and the United Kingdom, while the line is flat for the United States. Yet, the low number of data points combined with the large spread of values in three of the four countries studied forces us to take the linear trend lines with a pinch of salt. We therefore conclude that the data essentially contradict the hypothesis that increasing levels of interna-tionalization correspond to decreasing levels of democratic input legitimacy. Only developments in Germany and the United States might conform to the hypothesis. For the United Kingdom and Switzerland, one would have expected a pronounced negative trend, because both countries are affected by European integration, albeit to a lesser degree than Germany. Hence the positive trend lines for both countries run completely counter to theoretical expectations, even though the democratic input legitimacy level is invari-ably lower than for other criteria in the UK discourse.

Nor is the theoretical expectation confirmed that in years of deepening European integration democratic input legitimacy levels might decrease more substantially than the values for assessments based on other evalua-tion criteria. In Germany, the levels of legitimacy for democratic input fall below those for other evaluation criteria in 1999 and 2007. While this is in line with theoretical expectations, the results for the other three years that we singled out above (2002–2004) are not, because the legitimacy levels of both groups of criteria develop in the same direction and display quite similar values. The findings for Switzerland are equally ambivalent. In 1999 and 2000, the levels of democratic input legitimacy are, contrary to our expectations, similar to the legitimacy levels of other criteria. Only in 2004 and 2005, legitimacy levels for democratic input are indeed below those of other criteria. However, only in 1999 and 2005, a decreasing value may be observed, whereas 2000 and 2004 show substantial increases. In even starker contrast to expected developments, we note increasing rather than decreas-ing levels of legitimacy for democratic input in the UK discourse in three out of the four years of growing European integration (1999, 2004 and 2007). Only in 2003, there is a slight decrease. In conclusion, the empirical evi-dence on legitimacy levels of democratic input criteria also contradicts the expectation of a negative influence of internationalization on the legitimacy of the democratic nation state.

Internationalization frames

The final set of hypotheses addresses the discursive context in which the legitimacy of the nation state is assessed. As suggested above, to have a plausible discursive effect the salience of internationalization in legitimacy-related discourses must be high and growing. We expect this to be the case, especially concerning references to European integration (H3a).

Figure 9.4 indicates the share of legitimation statements made in the con-text of internationalization frames across countries and over time. It reveals,


first of all, that internationalization frames indeed play more than a negligi-ble role in all four countries. Although they are not the dominant frames in national legitimation discourses, references to internationalization feature rather prominently in these discourses, quite independently from the degree to which the countries are integrated into the EU.

Hence there is what might be called ‘smoking gun’ evidence that interna-tionalization has an impact on legitimation discourses despite the fact that the first two internationalization-related hypotheses had to be rejected. In fact, this observation helps us to understand much better why there is no erosion of legitimacy levels. While our data demonstrate that internation-alization processes are a feature of national legitimation discourses, interna-tionalization is rarely the dominant frame when the legitimacy of the four democracies examined is assessed by their media publics. In contrast to the implication of the erosion hypothesis, internationalization is simply not the most prominent lens through which the legitimacy of the democratic nation state is evaluated.

As regards the relative differences between countries, the empirical evi-dence on the aggregate share of internationalization frames over the entire period of analysis is not quite in line with our theoretical expectations. While the German and US discourses rank as expected, the ranks of Switzerland and the United Kingdom do not match our initial expectations. With a share of more than one quarter of all relevant statements (25.8 per cent), internation-alization frames are most frequent in the German discourse. This is compat-ible with the strong internationalization of the German polity. By contrast, in the US discourse internationalization frames are only half as frequent (13.3 per cent). The Swiss legitimation discourse, however, does not match the theoretical expectations. Although as a non-EU member state Switzerland

Figure 9.4 Shares of internationalization frames over time (%)

USUKCHDE

Treaty of AmsterdamBilateral Agreements I Euro

Treatyof Nice

EU25Constitutional Treaty

Bilateral Agreements IIEU27

Treaty of Lisbon


is less politically internationalized than Germany and the United Kingdom, its legitimation discourse features a share of internationalization frames (25.2 per cent) that is similar to the German discourse and considerably higher than in the UK discourse. Contrary to theoretical expectations, the results for the UK discourse (16.2 per cent) are more similar to those for the US than for the German discourse. In sum, internationalization frames play a more important role in the two continental European countries of Switzerland and Germany, and are less frequent in the two Anglo-Saxon countries.

This mixed outcome with respect to our hypothesis is further illustrated by developments over time. Contrary to our theoretical expectations, Figure 9.4 reveals country-specific cyclical developments that do not seem to be driven by advancing internationalization. These fluctuations are most pro-nounced in the German discourse where our data show, on the one hand, peaks in 1999 and 2004, years in which internationalization frames dom-inate the legitimation discourse, and, on the other, troughs especially in 2002 and 2003, when the frequency of internationalization frames shrinks to approximately ten per cent. Although these cyclical development patterns are weaker in the other three countries, where the difference between the absolute highs and the absolute lows is less than half that of the German case, all four countries follow distinct trajectories that do not match the process of European integration, with peaks and troughs occurring at differ-ent points in time. Our data on the German discourse are in line with the theoretical expectations for 1999 and 2004: Steps towards integration are accompanied by the highest shares of internationalization frames. However, we also note a decrease to the second lowest and lowest share in 2002 and 2003. Conversely, the signing of the Treaty of Lisbon in 2007 is only accom-panied by marginal increases to an average value. In particular, the results for 2002 and 2003 contradict our expectations.

Results are equally mixed for the UK discourse, where we find increasing shares of internationalization frames in 2004 and 2007, but a decrease to the second lowest and lowest value in 1999 and 2003. Similarly ambivalent results obtain for Switzerland, because we find shares decreasing to below-average values in 1999 and 2004, and shares increasing to above-average values in 2000 and 2005. This could indicate that it is not so much the signing of international treaties such as Bilaterals I and II in 1999 and 2004 but rather their ratification through referenda in 2000 and 2005 that con-tributes to the stronger attention of legitimation discourses to processes of internationalization.

We now turn to our final hypothesis (H3b) and ask whether the presence of internationalization frames negatively affects the legitimacy levels of the democratic nation state. According to this hypothesis, we do not necessarily observe a general erosion of legitimacy levels, but legitimation statements framed in the context of internationalization should display lower levels of legitimacy than differently framed statements. To test the hypothesis, we


calculated legitimacy levels for statements made in the context of the inter-nationalization frame and for all other statements.

Figure 9.5 plots the results for each country and over time. One observa-tion that immediately strikes the eye confirms our previous results for devel-opments over time: Legitimacy levels follow nationally distinct trajectories rather than a uniform downward trend. Moreover, levels of legitimacy for statements with and without the internationalization frame are quite simi-lar. Thus, our hypothesis that legitimation statements made in the context of internationalization frames will have lower levels of legitimacy (H3a) is not confirmed by the data. The overall levels of legitimacy for statements linked with the internationalization frame are even higher than for other statements in Germany, the United Kingdom and the United States – in Switzerland, aggregate levels are almost indistinguishable. Higher levels of legitimacy for statements made in the internationalization frame are even a quasi-permanent feature of all four discourses.

This result is most pronounced in the United Kingdom, where it is the case in eight of the ten selected years, including the four decisive years of European integration (1999, 2003, 2004 and 2007). In Germany and the United States, legitimation statements framed in the context of internation-alization display a higher level of legitimacy in seven of the ten years, and in Switzerland this is still the case in six years. In the German discourse, and except for 2003 and 2007, when levels of legitimacy for both groups of state-ments are almost similar, the years in which European integration advanced (1999, 2002 and 2004) are marked by higher levels of legitimacy for evalu-ations made through the lens of internationalization. In Switzerland, the results are more mixed, because in 1999, 2000 and 2005 legitimacy levels for statements linked with the internationalization frame are higher than

Figure 9.5 Legitimacy levels of internationalization frames per country over time

−1.0

−0.5

0.0

0.5

1.0Switzerland

−1.0

−0.5

0.0

0.5

1.0Germany

−1.0

−0.5

0.0

0.5

1.0United Kingdom

−1.0

−0.5

0.0

0.5

1.0United States

1998 2000 2002 2004 2006 1998 2000 2002 2004 2006

InternationalizationOther

1998 2000 2002 2004 2006 1998 2000 2002 2004 2006


for other statements, whereas it is the other way round in 2004, when the respective level of legitimacy falls to the lowest value in the analysed time period. In short, the empirical evidence shows that legitimation statements framed in an internationalization context, though generally not more posi-tive, tend to increase rather than decrease the level of legitimacy in the four democracies. Hence the hypothesis that internationalization as a discursive frame impacts negatively on the legitimacy of the democratic nation state cannot be confirmed based on our data.

Conclusion

In this chapter, we tested empirically the frequently made claim that inter-nationalization processes erode the legitimacy of the democratic nation state. In the light of our empirical evidence on national legitimation dis-courses, this claim cannot be confirmed. In our four established, stable democracies, levels of legitimacy fluctuated considerably during the ten-year period between 1998 and 2007, but we do not observe a consistent down-ward trend. Moreover, the fluctuations do not correspond to the varying degrees of internationalization of the four countries examined. However, this result does not mean that internationalization is irrelevant for public legitimacy assessments. In our four countries, between one-seventh (US) and one quarter (DE and CH) of all legitimation statements are made together with an explicit reference to internationalization processes. Thus interna-tionalization and especially Europeanization are present in public discourses about the legitimacy of national political orders. Actors explicitly refer to the deepening of European integration and other processes of internationaliza-tion, but this does not translate into lower legitimacy levels of the demo-cratic nation state. Rather, our findings suggest that the nation state may even regain legitimacy when it is assessed with a view to the consequences of internationalization. This confirms earlier findings by Frank Nullmeier and his collaborators (2010) that international organizations and especially the EU enjoy much less legitimacy than the democratic nation state, and that their legitimacy levels are often even critically low.

Our results thus indicate that the notion of an automatic link between processes of internationalization or European integration and the discursive evaluation of a political system’s legitimacy is theoretically questionable and not corroborated by empirical evidence. The discursive construction of legit-imacy does not simply mirror external macro processes. Actors participating in legitimation discourses consciously reflect on processes of internationali-zation. They evaluate how internationalization or Europeanization affects their notion of the legitimacy of the democratic nation state, its principles and its institutions – and their evaluation is not always negative.

Moreover, legitimation discourses are influenced by numerous fac-tors. Elsewhere we have shown that the overall configuration of national


legitimation discourses is strongly influenced by (a) the institutional design of political systems and (b) the idiosyncrasies of the media systems (Haunss and Schneider 2013). The varying legitimacy levels of different national pub-lic spheres are, for instance, strongly influenced by whether or not eval-uative statements by journalists are limited to the editorial pages and by the degree to which government representatives – after all, the main legitimizers – are given voice in the quality press.

The fluctuation of legitimacy levels over time is also event-driven. In the United States, for example, the impeachment against President Clinton and the Iraq War shaped the debate to a large extent, and similarly different short-term policy issues influenced legitimation discourses in the other three countries. Legitimation discourses are thus characterized by what we have called ‘legitimacy attention cycles’ (Schneider et al. 2010, 63). The media’s limited attention span has the effect that issues relating to the legitimacy of political orders, their institutions and values typically remain in the focus of public debate for no more than a limited period of time.

These results do not contradict the theoretical argument that internation-alization processes seriously impede the ability of citizens and their elected representatives to control social processes that directly affect their daily lives. Supranational technocratic decision-making without democratic control by the people who are affected by these decisions – like the policy prescrip-tions of the Troika in the euro crisis – are highly problematic developments. However, the translation of these developments into evaluations of national political systems is not automatic, but rather follows its own logic of discur-sive interaction.

Notes

1 Based on the mean value of the KOF index on globalization for the 1998–2007 period, Singapore is the only non-OECD country among the 25 most interna-tionalized countries. On the 100-point scale of the KOF index the mean values of our four countries are 88.9 (Switzerland/CH), 86.3 (Germany/DE), 81.4 (United Kingdom/UK) and 76.2 (United States/US), with a variation over our ten-year period of less than five points for each of the four countries.

2 Patton (2002) describes this method as the selection of those information-rich cases that intensely display the phenomena of interest.

3 The time windows are ‘anchored’ by the following events: the parliamentary debate on the so-called annual objectives (Jahresziele, CH), the Chancellor’s government declaration in the annual budget debate (DE), the Speech from the Throne (UK) and the State of the Union address (US).

Part VWelfare Dimension: State Intervention

189

10Pioneers of Paradigmatic Change? Welfare State Restructuring in Small Open EconomiesPeter Starke and Herbert Obinger

This chapter attempts to explain how the profound changes of the international political economy since the 1970s have triggered a fundamental transformation of the welfare state as a core dimension of the modern state. This is by no means a new research question. In the late 1990s and early 2000s, the impact of economic globalization on advanced welfare states was the dominant topic in macro-quantitative research. Interestingly, however, despite a large amount of research, no consensus has been achieved about whether and how economic globalization has affected national welfare states. Evidence has been presented to support virtually any theoretically plausible explanation about the globalization–welfare state nexus. Consider the following quotes:

The only evidence of a significant globalization effect to emerge anywhere in the analysis is an apparent relationship between the growth of foreign direct investment and cutbacks in existing programme spend-ing. However, this is an effect that proves not to be statistically robust. Thus the crisis threat of globalization [. . .] is revealed as a ‘paper tiger’. (Castles 2004, 17)

An increase in a country’s imports is associated with an increase in gov-ernment spending. This effect is magnified when a large portion of the working age population is employed in tradable industries. (Hays et al. 2005, 488)

When looking at the impact of changes in openness on changes in spending, we find a strong and statistically robust association between increases in economic openness and decreases in public spending across a variety of spending types. (Busemeyer 2009, 475)

Apparently, there is empirical evidence corroborating what is called the effi-ciency thesis (Busemeyer 2009) and its counterpart, the compensation thesis (Hays et al. 2005). Other scholars claim that the threat from changes in the

190 Welfare State Restructuring in Small Open Economies

international political economy is much ado about nothing (Castles 2004; Swank 2005).

Overall, it seems that the quantitative literature has reached an impasse. The reasons for this problem are manifold. For instance, there is disagreement about the operationalization of both globalization (trade openness, trade from low-income countries, foreign direct investment and globalization index measures) and the welfare state (aggregate or disaggregate spending, replacement rates and structural measures). In addition, issues of model specification persist (Kittel and Winner 2005) and empirical studies differ in the time periods they examine (Busemeyer 2009).

In this chapter – and in a more comprehensive book on the same topic (Obinger et al. 2010) – we attempt to address the issue empirically from a different angle. In light of the quantitative literature’s difficulties in arriving at a firm conclusion about the impact of globalization on the welfare state, we base our explanation on a detailed qualitative analysis of a small number of countries in comparison over a long period of time. Focusing on Austria, Denmark, New Zealand and Switzerland, we study the process of welfare state restructuring in four small developed economies between the early 1970s and the onset of the global financial crisis in 2008. We consider the four policy sectors that take up the bulk of social expenditure in advanced welfare states: pensions, labour market policy, healthcare and family policy.

We have selected small, advanced welfare states since they may be regarded as the ‘most likely cases’ of globalization-induced change. If globalization explains social policy convergence or even a ‘race to the bottom’, the effect should be visible in a sample of small states. By virtue of being small states, on the one hand, our countries are particularly vulnerable to and at the same time dependent on world market developments; on the other hand, they show maximum variation in terms of their political and welfare state settings. Our sample covers four different welfare regime types (Esping-Andersen 1990): one social-democratic welfare state (Denmark), one conservative welfare state (Austria) and one liberal welfare state (Switzerland), as well as the ‘wage earners’ welfare state’ of New Zealand (Castles 1985). Moreover, policy-learning capacities are high in small states due to the small size of the political elite, while decision-making costs are lower for the same reason. Hence, small nations are considered to be capable of reacting quickly to new challenges (Katzenstein 2003, 11). For these reasons, the impact of globali-zation should be most readily apparent in small countries. In consequence, they constitute a kind of ‘Sinatra case’: If the welfare state can make it there, it can make it anywhere (Bennett and Elman 2006, 462).

In stark contrast to a simple version of the efficiency thesis, our findings suggest that small states have not converged to the lowest common denomi-nator level of social provision. However, this is not to say that there has not been policy convergence. When looking at the four main policy areas of the welfare state over a longer period of time, we find some convergence

Peter Starke and Herbert Obinger 191

towards what may be called supply-side-oriented social policy. While this does not automatically entail large-scale retrenchment and privatization, it does mean a turn towards ‘politics with markets’.

Adjustment pathways by policy sector: Common trends, but . . . ‘I did it my way’

In this chapter, we start by describing the dominant reform trends in our four countries by policy sector – pension systems, labour market policy, family policy and health policy – before offering an explanation for the develop-ments in each sector.

The multi-pillarization of pension systems

In the field of pensions there has been a convergence of countries towards multi-pillar pension schemes but not necessarily a retreat of the state or a shift to ‘non-social’ pensions. Multi-pillar pensions can mean very different things. The significance of public pensions within the pension mix varies, as do the extent to which the government assures wide coverage of supplemen-tary provision and the extent to which redistribution has been implanted into the other pillars. Hence, there are important differences in terms of the kind of state involvement and the redistributive impact of the entire pension arrangements comprising various state and non-state types of provision.

Switzerland is to some extent an outlier, as the country had always relied on an informal pension mix consisting of public pensions, occupational pensions and private saving schemes. Switzerland was thus an ‘early bird’ that figured prominently in the World Bank’s multi-pillar philosophy in pension policy (World Bank 1994). However, the Swiss multi-pillar system was not deliberately designed but rather an unintended result of early policy pre-emption by private forms of provision and multiple institutional veto points inhibiting the adoption of a public pension scheme. This fragmented system of provision was eventually restructured and transformed into a for-mal multi-pillar system in the 1970s and 1980s.

The multi-pillar pension system in Denmark is likewise not attributable to a deliberate political decision but rather emerged from political deadlock. The majority of the Danish population was entitled only to a basic public pension in the 1970s. Status preservation for the elderly thus was a major political issue. Given a series of non-decisions at the parliamentary stage, earnings-related pensions were finally negotiated outside the parliamentary arena by the social partners on the basis of collective agreements. In con-sequence, both these labour market pensions and various forms of private provision have gained importance in Denmark since the 1980s.

Pension policy in New Zealand and Austria had been more or less monop-olized by the state until the end of the ‘Golden Age’. Compared to Denmark and Switzerland, shifts towards a multi-pillar system therefore occurred


rather late. Austria moved into this direction only in the early 2000s when the statutory severance payment was converted into a second-pillar pen-sion and a subsidized voluntary saving scheme was introduced. New Zealand only hesitantly followed suit in 2005 with the introduction of the KiwiSaver, a voluntary but state-subsidized private saving scheme. In all four countries, although public pensions remain by far the dominant form of provision, income support for future generations of pensioners will be based on a more pronounced mix of public and private pensions.

In respect of first-pillar pension reform, similarities as well as differences characterize national adjustment pathways. What all four nations have in common is that early retirement programmes (where they existed), which in the past were often extensively used to mask labour market problems, have been rolled back. In addition, the retirement age has been raised, particularly for women. Other reforms of public pension schemes have been strongly structured by pre-existing patterns of welfare state financing, with marked differences between social insurance-based systems (Austria and Switzerland) and tax-funded systems (Denmark and New Zealand).

Both Austria and Switzerland introduced pension credits for family and care work and made pension entitlement and benefits more gender-neutral through the introduction of widower’s pensions and, in Switzerland, pen-sion-splitting for couples. Moreover, both countries have also changed the pension formula and increased existing means-tested minimum pensions. Since public pensions offered relatively low benefit levels in Switzerland, a new pension formula designed to benefit low-income groups was adopted.1 In addition, means-tested supplementary benefits for needy retirees have been expanded in scope. The Austrian development has been more ambiguous. While some specific groups at the margins of the labour market have been given the opportunity to take out public pension insurance (opting-in), atypi-cal employees, and women in particular, have lost out as a consequence of a stronger contribution–benefit nexus, with the benefit calculation now based on the average income earned in a lifetime. The only offsetting compensation for these changes was an increase in the means-tested minimum pension and the provision of pension credits for child-raising and care work. In contrast to its western neighbour, Austria’s pension system has traditionally been highly fragmented by occupation. In 2005, the government adopted a reform that brought federal civil servants within the ambit of the general pension scheme.

Gender issues and the inclusion of atypical workers were of less relevance in countries with universal and tax-financed public pensions because bene-fits were detached from the labour market and marital status. Public pensions nevertheless were a site of reform. Mainly in an effort to reduce expenditure, eligibility for universal pensions was limited. With the introduction of the superannuation surcharge, New Zealand adopted an element of income-testing designed to tax the better-off. Under the pressure of the populist New Zealand First Party, however, the surcharge was eventually abolished.


Denmark enhanced the income-tested part of the basic pension so that the traditional universal approach in pension policy was rolled back.

With a view to the overall pension mix, we observe policy convergence. Public pensions have come under pressure everywhere, especially the more egalitarian elements of the pension arrangements. While the more extreme forms of old-age poverty are addressed by new or expanded minimum- protection schemes,2 the other public and private elements of the pension mix have become more strongly employment-based and earnings-related, and hence recommodifying and potentially inegalitarian. Pension policy in the global economy increasingly follows an actuarial logic and often explic-itly integrates private and occupational provision in a multi-pillar architec-ture. In countries where this was already the case in the 1970s, that tendency was strengthened, but other countries have successively caught up.

From passive to active labour market policy

Arguably the most striking parallels between the four countries’ pathways may be observed in the field of labour market policy. All four countries moved from a mostly passive orientation to activation policies aiming to reduce welfare dependency and to integrate the unemployed into the labour market and society. At the same time, all four countries imposed cutbacks of cash benefits and stricter benefit eligibility requirements, reduced benefit duration for the able-bodied unemployed and deregulated their labour mar-kets and working-time regulations. Public job placement was in some cases decentralized and restructured in an effort to improve efficiency, for exam-ple, through the establishment of so-called one-stop shop administrations.

However, there are cross-country differences in the timing of reforms, the measures and benefit cutbacks implemented and the resulting shift in the bal-ance of social rights and duties. Denmark, New Zealand and Switzerland were international frontrunners in this policy area. While Denmark responded to the economic crisis of the 1970s mainly with higher cash benefits, employ-ment programmes and early retirement schemes, the massive labour market crisis in the early 1990s led to an activist turn in labour market policy. The adopted ‘flexicurity’ approach influenced European employment policy and became a blueprint for labour market reforms in many other countries. New Zealand, in contrast, did not subscribe to this path, but rather relied on radical cutbacks of cash benefits combined with a mainly workfare-based acti-vation strategy. While work tests play a major role in this setting, less empha-sis was put on training measures, and benefits were low. Switzerland was a latecomer in terms of cash benefits because it had no mandatory unemploy-ment insurance until the 1970s. When, in the 1970s, the country for the first time in the post-war period experienced significant unemployment (albeit low by international standards), the government introduced mandatory insurance, offering very high replacement rates. This new generous scheme generated a deficit due to mounting unemployment in the early 1990s.


This time, however, the government responded with an expansion of active labour market policies. A government-proposed moderate cutback of cash benefits failed in a referendum. Together with its traditionally weak labour market protection, Switzerland therefore implicitly adopted a ‘flexicurity’ approach in the 1990s. It was not until the 2000s that a first but moderate retrenchment of cash benefits was implemented.

As in Switzerland, unemployment remained comparatively low in Austria. However, unlike its neighbour and more in line with Danish practice, Austria relied strongly on labour-shedding strategies based on early retirement pro-grammes, higher cash benefits and its huge public (enterprise) sector to limit unemployment growth in the 1970s and 1980s. Yet, once the public enter-prise sector collapsed in the mid-1980s, and the deficit and public debt went up, cash benefits were cut back. However, retrenchment remained moderate, as did the expansion of active measures tailored to particular problem groups. Hence, passive labour market policy still prevails but has nevertheless been subject to reforms. Non-wage labour costs for older unemployed and lower-income groups are covered by public funds, whereas quasi-freelancers and the self-employed (opting-in) were included in unemployment insurance. In the very recent past, the Austrian government has begun to subscribe to a sort of ‘flexicurity’ approach. Working-time flexibilization has been com-bined with the introduction of a minimum wage and harmonization of the social assistance benefits offered by the Länder (federal states).

Irrespective of these cross-national differences, it is apparent that labour market policy has been subject to paradigmatic change. Passive schemes have been pushed back and supplemented with a whole battery of activat-ing measures aiming at employability and labour market integration. In a nutshell, the priority has shifted from decommodification to recommodifi-cation and from the demand side to the supply side of the labour market. The global shift towards more flexible labour markets has been accompanied by labour market reforms that strive for individual market compatibility.

Family policy: An area of expansion

Expansion has been the common trend in family policy, with all four coun-tries introducing new or more generous benefits for families. Commonalities in this policy area are the introduction and expansion of paid parental leave schemes, including an extension to fathers,3 and an expansion of childcare facilities. Austria and Denmark upgraded and overhauled their parental leave schemes, whereas New Zealand and Switzerland introduced such schemes in the early 2000s.

Despite these similarities, policy priorities and measures adopted dif-fer. Austria continued to increase the already generous transfer payments and tax deductions. Parental leave was enhanced, extended to fathers and, finally, detached from labour market participation. In addition, meas-ures designed to combine family work and employment were enacted. By


contrast, the Austrian government only sporadically sought to expand the provision of services, which is the responsibility of the Länder. Family policy in Switzerland was sidelined for decades at the federal level. Swiss policy jurisdiction is even more decentralized than in Austria, which led to a fragmented system of cash benefits at the cantonal level. In the 2000s, a harmonization of cantonal cash benefits was achieved, and maternity leave was introduced after several attempts had failed in a referendum vote. In a similar vein, increases in the provision of services proceeded very sluggishly and remained at a comparatively low level.

As in Switzerland, family policy in New Zealand was not part of the post-war welfare state settlement. In the 1970s and early 1980s, there was almost no state intervention in the area, and income support to families actually declined. Instead, the government attempted to protect families via wage regulations by promoting a ‘family wage’ as part of the wage earners’ welfare state strategy. The demise of the wage earners’ welfare state reduced the role of the family wage, the benefit for lone parents was cut back, and the universal family benefit, which later on became means-tested, was only sporadically adjusted to inflation. From the mid-1980s onwards, however, this trend was partially reversed and the government also launched initia-tives to increase the number and quality of childcare facilities. The 1990s saw an overhaul of income support for families and, in consequence, the end of universalism, since cash benefits henceforth consisted of a benefit for needy families and various tax credits for working families. The generosity of cash benefits was massively expanded in the 2000s. In addition, the govern-ment introduced a paid parental leave scheme and adopted several measures to promote institutional childcare. Denmark, in contrast to the other three countries, institutionalized a highly developed system of public childcare facilities from early on, although, initially, leave programmes were of rather short duration. Both the provision of services (including, later on, private kindergartens) and the duration of leave periods were expanded over time.

In sum, all four countries made efforts to assist parents to reconcile work and family life, but both the measures used and the extent to which family policy was prioritized varied quite considerably from country to country. Nevertheless, despite the different paces, no country significantly diverged from a path that, at least to some extent, aims at tapping the human capital resources of a well-educated female workforce by allowing a greater balance of work and family life. It seems that family policy has become part of the ‘high-skill road’ to the global economy. The degree to which the countries can achieve the ambitious (and sometimes conflicting) goals of current fam-ily policy regimes, however, remains questionable.

Health policy: Borrowing strength

Healthcare policy reforms were everywhere motivated by considerations of cost containment and strongly preconfigured by problems related to the


institutional make-up of particular national healthcare systems, which were characterized by a huge diversity in the mid-1970s. More specifically, the countries analysed here represent all the major types of healthcare systems distinguished in the literature, that is, a national health service (Denmark and New Zealand), a mainly privately organized liberal healthcare system (Switzerland) and a social insurance-based system (Austria).

Inefficiencies, such as waiting lists and issues related to the free choice of doctors, guided the reforms in the two countries with a national health ser-vice. Switzerland’s liberal scheme was confronted with a massive increase in healthcare costs, adverse selection problems and a low degree of solidarity. Austria had to deal with inefficiencies created by a territorially fragmented healthcare system, notably in the hospital sector, and with the legacy of an occupationally fragmented health insurance characterized by significant dif-ferences in terms of contribution rates, level and duration of cash benefits and co-payments.

It therefore comes as no surprise that the reforms enacted to cope with these problems differed from country to country. Interestingly, however, and much in line with research carried out by Rothgang et al. (2005, 2010 and Chapter 12 in this volume), the countries adopted new forms of governance and regulation typically utilized in other healthcare systems. Hence, the countries relied on a sort of ‘borrowing strength’ strategy to cope with the peculiar inefficiencies generated by their established healthcare systems.

Initially, healthcare reform in New Zealand was characterized by numer-ous and often short-lived experiments. With a view to lowering costs and increasing the efficiency of the state-run hospital sector, the government established quasi-markets. By and large, however, this endeavour failed, and the country returned to a more centralized, universal and state-con-trolled system. The attempt to strengthen competition within a publicly run healthcare system was less pronounced in Denmark, but the reforms enacted nevertheless increased the freedom of choice for patients in selecting both hospitals and general practitioners and enhanced competition between hos-pitals. Apart from these changes, however, the national health service sys-tems in both countries remained, by and large, unchanged.

Switzerland introduced mandatory health insurance in 1994 and increased public financing to lower health-related costs for low-income groups and families. Other reforms, however, stuck to the traditional liberal approach, with rises in co-payments and a strengthening of competition among the largely private sickness funds. Austrian policy-makers sought, with varying success, to increase public control over the healthcare system on the one hand and to raise private co-payments on the other. While state influence through medical planning powers has been strengthened, markets are still to a very considerable extent crowded out from the sector. There is neither competition between sickness funds nor an opportunity for the better-off to take out private insurance. Finally, occupationally fragmented differences in


terms of cash benefits have been levelled out to a significant degree, and the government introduced a tax-funded universal long-term care benefit in the early 1990s, which, as a side effect, has increased the provision of services for the frail elderly.

The cross-national picture in the area of health policy is much messier and cannot be easily summed up in line with a convergence scenario. The least that can be said is that healthcare systems increasingly mix and match different regulatory mechanisms, financing sources and provider roles. They have significantly diverged from their starting points and transformed into ‘hybrid’ healthcare systems (Rothgang et al. 2005, 2010 and Chapter 12 in this volume).

The overall picture

To sum up, we find similar policy trends in all four countries across the four policy areas: multi-pillarization in pensions, activation in labour mar-ket policy, an expansion of family leave schemes and family services, and hybridization in healthcare. This similarity may be interpreted as a specific form of policy convergence across the small states analysed.

We now briefly examine the question of whether there is also a convergence of welfare regimes. The national reform trajectories do not sup-port the notion that a liberal welfare system represents the common end point of social policy development in an age of globalization. Denmark’s welfare state is still dominated by social-democratic characteristics, while the Austrian welfare state is still imbued with Bismarckian conservative princi-ples. Admittedly, much policy change has occurred in Austria, and some par-ticular regime traits have been ironed out. But these changes do not add up to regime transformations and have, in any case, been to some extent coun-ter-balanced by reforms that have further strengthened traditional regime characteristics. Contrary to the liberal ‘vanishing point’ thesis, Switzerland, basically a liberal welfare state in the immediate post-war period, if any-thing, shifted away from the liberal welfare state model to one that is now much more in line with the welfare state model of continental Europe. New Zealand is the only country in the sample that became more purely liberal over time, mainly through the dismantling of the wage earners’ wel-fare state. Once the various pillars underpinning a ‘social policy by other means’ (Castles 1989) collapsed, New Zealand was left with a residual system of social protection showing genuine liberal traits which, later on, became even more pronounced.

While there is thus no sign of a general shift towards the welfare residualism of the liberal regime, the significant policy changes discussed so far, and the regime transitions in Switzerland and New Zealand in particular, demonstrate that the notion of ‘business as usual’ is nonetheless unwarranted. The evidence rather supports a shift to ‘politics with markets’, which does not necessarily mean a rollback of social protection but rather


the streamlining of social programmes in accordance with the imperatives of employability, flexibility and cost efficiency. The result resembles the ‘enabling state’ which, according to Neil Gilbert, ‘is captured by the tenet of public support for private responsibility – where “private” responsibil-ity includes individuals, the market, and voluntary organizations’ (Gilbert 2002, 16; see also Gilbert and Gilbert 1989).

As we will see, this is not to say that policy-makers no longer have any choice or that political institutions and welfare state patterns are irrelevant. It means rather that a realignment of social policy has taken place. This shift towards supply-side-oriented policies is arguably most salient in labour mar-ket policy. But even contemporary family and pension policies demonstrate the fact that contemporary welfare states have been reformed with a view to improving market compatibility and to reaping the alleged benefits of market competition.

Explanation

These trends are clearly in need of an explanation. We argue that the conver-gent trends discussed are rooted in common pressures imposed by structural changes in society and the (international) economy, while the differences that come into play in the translation of the new paradigm into national social policy reforms result from political factors, notably political actors, institutions and policy legacies.

Common pressures: Societal modernization and globalization

Since the far-reaching changes we described have taken place under very different institutional conditions – both in terms of political systems and welfare state regimes – and were enacted by governments of very different ideological orientations, there is reason to assume that the change in overall course has strong functional causes. Indeed, there is ample evidence that socio-economic problem pressure was the crucial trigger for similar policy changes in all policy sectors examined. All four countries had to cope with the repercussions of structural economic change and societal transformation taking effect during the past three decades. The shift to a predominantly ser-vice economy entailed lower economic growth and, in consequence, tighter constraints on public revenues, while societal modernization and demo-graphic changes generated mounting social needs and new risk patterns.

Labour market reforms are a clear case in point. Deindustrialization, tech-nological changes and ever-increasing exit options for businesses to relocate sites overseas lowered the domestic demand for low-skilled labour and led to long-term unemployment and the exclusion of less-skilled workers from the core labour market. In consequence, countries were facing protracted struc-tural labour market problems in the 1990s. Against the backdrop of mount-ing unemployment and fiscal strains, the old tools of demand-side-oriented


labour market policy were considered less appropriate, and the cost of con-tinuing this course had become higher. Arguably the simplest strategy for reducing costs and at the same time increasing public revenues was to raise the level of labour market participation. Indeed, activation became the magic word from the 1990s onwards. However, a broad set of policy tools for promoting employment is available to policy-makers. Examples include cutbacks of cash benefits and non-wage labour costs, tighter conditionality, the promotion of part-time work, the deregulation of employment protec-tion, in-work benefits, wage subsidies, public employment, family-friendly policies and efficient job placement. This list is far from being exhaustive.

With respect to pensions, fiscal problems, demographic ageing and high (projected) returns from capital markets have led governments to move away from single-pillar solutions. Multi-tier pension schemes may be seen as a functional response to all these challenges. At the heart of this response is the idea of risk diversification in terms of the financing mode. Moreover, pension reforms were also driven by gender issues and concerns connected to the spread of atypical jobs, that is, challenges that are also ultimately attributable to societal and economic transformation. This has led to the inclusion of minimum standards in the otherwise more strongly ‘recom-modified’ pension architectures.

In family policy, rising standards in female education and social moderni-zation have led to a significant increase in female participation rates and, in consequence, to a growing demand for policies that help to reconcile work and family life. A family policy centred on the male breadwinner model has not fully disappeared but has lost legitimacy among much of the electorate, even though sizeable differences among countries still remain. In addition, the expansion of family policy has been prompted by a decline in fertility rates, which have everywhere stabilized below the replacement rate, and by new poverty risks connected to structural shifts in family and employment patterns.

In healthcare, technological progress and population ageing have built up pressure for higher public expenditure. In addition, the ‘greying’ of the population has increased the demand for long-term care, which is typically an age-related risk. Demand for government intervention in this area also resulted from rising female labour market participation and the erosion of traditional family structures. Under circumstances of fiscal strain, cost containment and cost efficiency became the leitmotivs for reform and prompted a search for more efficient means to finance and provide care. This search has, perhaps surprisingly, led to sometimes unorthodox solutions that were found ‘off the beaten path’ of the particular healthcare system.

It would be nonetheless quite wrong to assume that globalization has not played a role in this. While globalization did not engender a race to the bot-tom, it fuelled a supply-side-oriented transformation of economic and social policies. To begin with, economic globalization reinforced the challenges


and the problem pressures that had built up as a result of political decisions taken in the past (for instance, strategies of labour shedding) and in the wake of structural changes in society and economy. High levels of public debt accumulated in the past became more difficult to maintain in increas-ingly open economies. In addition, greater exit options for business and capital owners imposed constraints on state revenues and reinforced struc-tural unemployment through the removal of low-skilled jobs to low-wage economies. Economic globalization therefore reinforced economic structural change and undermined the fiscal autonomy of the nation state. These pro-cesses and the repercussions of deindustrialization and societal moderniza-tion put governments under considerable strain. The uniform response was a fundamental realignment of economic policy.

All four countries, irrespective of the national distribution of power resources, adopted (or even strengthened, as did Switzerland) supply-side-oriented economic policies in the 1980s and, particularly, the 1990s. Keynesianism, practised in Denmark and Austria in the 1970s, is, at least as a long-term economic policy strategy, a dead duck at the national level. Instead, small countries lowered tax rates and regulatory standards in order to create a more business-friendly environment. Today, there is strong cor-relation between country size and corporate tax rates, suggesting that small countries deliberately attempt to exploit foreign tax bases (Ganghof and Genschel 2008). In addition, debt containment and balanced budgets fea-tured high on the agenda everywhere. The new supply-side-oriented para-digm also affected the welfare state of small countries. It is not surprising that the strongest impact may be found in the area of labour market policy, which is where economic policy and the welfare state most closely interact.

A corollary of this policy shift was that the strategy of ‘domestic defence’ and protectionism became unsustainable at reasonable cost in a markedly changed international economy. What happened in New Zealand was that the high barriers that protected domestic business were removed, and the economy was radically opened up to international competition. Against the backdrop of a deep economic crisis, the Labour government launched ‘Rogernomics’, one of the most radical programmes of economic restruc-turing ever seen in an advanced democracy. As a result, New Zealand bid farewell to the idea of domestic defence, upon which the post-war wage earners’ welfare state had rested, and opened up its economy. In contrast to economic policy, the welfare reforms implemented by Labour were much more cautious and limited. It is worth noting that this increased exposure to the world economy did not automatically lead to a shift to the kind of com-pensation strategy that has been suggested as typical of Northwest Europe’s small open economies, but rather led to activation and ‘make work pay’ transfer policies.

In general, it seems that even existing strategies of welfare compensation became more difficult to sustain, at least as they had been practised in the


immediate post-war period. In contrast to the rationale emphasized by the compensation thesis – which expects efforts to compensate income risks for workers, such as through higher unemployment benefits (Burgoon 2001) – we find significant retrenchment in the social protection of the working-age population, notably with respect to unemployment benefits. Moreover, the public sector, another bulwark against the fluctuations of world markets, was significantly restructured. Previously sheltered sectors were opened up to competition, and public utilities and state-owned enterprises, where they existed, were privatized. Austria’s huge mixed economy faded away in the aftermath of EU membership, while both New Zealand and Switzerland have retrenched their domestic protectionist bulwarks. In this respect, the Swiss arrangement was similar to New Zealand’s post-war political economy. The main difference, however, was that in New Zealand, the agricultural sec-tor supported a largely non-competitive manufacturing sector that was kept behind protective walls, while in Switzerland, the logic was the other way round. All these domestic types of cross-sectional compensation became less important in the period under review here.

In other words, the efficiency thesis explains the pattern much better than the compensation thesis, even though the notion of a race to the bottom scenario cannot be empirically sustained. Apparently, governments retain a considerable leeway in the ways in which they respond to the pressures of globalization, and governments of small countries – that is, those most clearly exposed to those pressures – have opted not to downsize but rather to streamline their welfare states. Overall, social policy in small states has increasingly become ‘politics with markets’: On the one hand, activation and family policy (but also pensions) aim at increasing labour market par-ticipation, and on the other hand, markets and quasi-markets are used in the provision of social benefits, notably in healthcare and pensions.

Sources of cross-national variation: Domestic politics

While socio-economic changes and international influences have paved the way for a common policy menu, domestic politics – that is, the impact of political institutions, policy legacies and political parties – shaped national choices. To begin with, national reform trajectories were foreshadowed by the consequences of past decisions and programme design. The policy legacy from the past not only generates distinctive challenges but also makes some options more likely than others, for instance, via positive and negative feed-back effects (Weaver 2010).

The typical response in labour market policy to the oil crises of the 1970s was explicitly or implicitly Keynesian in character. The crisis was mainly seen as a temporary episode, with Denmark and Austria responding with higher cash benefits and contributions as well as with strategies of labour shedding and labour hoarding, while Switzerland introduced mandatory unemploy-ment insurance. All these measures imposed fiscal costs, higher non-wage


labour costs and public indebtedness. The resulting fiscal consequences became more pressing in the context of the structural unemployment and economic recession that characterized the early to mid-1990s. For example, early retirement programmes designed to cushion labour market problems generated budgetary pressure that subsequently motivated pension reform.

Where pension reform is concerned, path dependency – that is, positive feedback effects – plays an overriding role in Switzerland. Since fully funded occupational pensions were already highly developed in the 1980s, neither a shift towards a Bismarckian regime nor one to a universal and tax-financed pension scheme was politically feasible. The pragmatic choice made was simply to put the existing mixed pension scheme on a formal – that is, con-stitutional – basis. In Austria, positive and negative feedback effects were more balanced. The sheer size of pay-as-you-go funded public pensions and the well-known double payment problem created strong positive feedback effects. Thus, as in the Swiss case, no paradigmatic reform option was avail-able. However, the huge costs of the extant system (equivalent to 14 per cent of GDP) and the resulting high contribution rate, generous early retirement programmes, population ageing and problems of legitimacy connected to the occupational fragmentation of the pension system created equally strong negative feedback effects. In the 1980s and 1990s, these challenges were mainly addressed by parametric reforms without bringing them fully under control. In the 2000s, the pension system was eventually restructured by adding two additional tiers on top of the Bismarckian-style public pensions.

Like Bismarckian systems, universal and tax-financed pension systems such as those of Denmark and New Zealand face distinctive problems. Equity issues, adverse effects on savings behaviour and fiscal pressure are examples of negative feedback effects that, as the case studies have shown, motivated policy change. In countries with universal pensions, more reform options are available because of the absence of a contribution–benefit nexus, and indeed, these two countries moved in quite different directions.

The Danish basic pension was supplemented by a fully funded labour market pension (ATP), which, however, failed to provide a living standard comparable to that in earlier employment and, in any case, was relevant for only a minority of the population. Hence earnings-related pensions were high on the agenda from early on in the post-war era, not least with a view to encouraging long-term savings. However, as noted previously, no way could be found through the conflicting interests on this issue to arrive at an acceptable legislative consensus. This void was pre-empted by private as well as by occupational pensions based on collective agreements. Repeated non-decisions fuelled the proliferation of these pension types. In consequence, a point of no return was reached in the late 1980s.

In New Zealand, by contrast, negative feedbacks may be observed. Budgetary pressure was increased by the significant expansion of New Zealand Superannuation in 1975. Soon, however, this opportunistic expansion


backfired when the additional costs became unsustainable in the mid-1980s. The solution adopted was to target the benefits. The political struggle in subsequent periods was mainly about how targeting should be implemented in practice.

It has already been mentioned that healthcare reforms were strongly driven by the distinctive problems generated by different healthcare regimes. For example, the national health service countries, Denmark and New Zealand, suffered from long waiting periods and restricted choice; Austria’s social insurance system suffered from the repercussions of occupational and territorial fragmentation; in the privately dominated Swiss system, problem pressure resulted from adverse selection and high health-related costs for low-income groups and families. Since many of these problems could not be addressed by a regime’s ‘within-logic’, all countries borrowed from the regu-latory tools utilized in other healthcare systems. Overall, what was common to all cases was a tinkering with the edges of existing systems rather than any kind of radical shift in system type.

Positive feedback effects are unlikely to occur in family policy as the usual suspects for generating them, such as adaptive expectations, network effects or sunk costs (Pierson 2004), are lacking. More plausible is the existence of negative feedbacks. For example, transfer-oriented policies tend to lead to relatively lower fertility and a lower growth in female employment in cross-national terms. Eventually, governments had to adapt their policies in order to reverse these trends. In fact, this is what we can observe, but, as we show in the next section, the reform of family policy was strongly shaped by the political preferences of policy-makers and by the institutional constraints they were facing.

Socio-economic problem pressure and policy legacies stimulate and often foreshadow policy change, but these variables still leave governments some room to manoeuvre. In fact, policy change cannot be explained without considering partisan political actors and their preferences. Hence, political parties did make a difference, but in more subtle ways than in the post-war period.

The within-case evidence has demonstrated that governments operating under broadly constant institutional conditions have attempted to influence social policy in line with their respective ideological leanings. However, the opportunity to do so was strongly shaped by short-term economic and fiscal circumstances and the type of government. Single-party governments were more likely to carry their agenda to completion than multi-party coalitions or minority governments. In a situation of economic crisis, governments of all kinds imposed retrenchment, but the extent varied depending on the partisan complexion of the government. Liberal and secular conservative parties have imposed more significant benefit cutbacks than left parties, with Christian Democrats occupying a position in between. The conserva-tive government led by Jim Bolger in New Zealand launched an attack on


the welfare state arguably unrivalled within the OECD world (Starke 2008). Virtually all sectors of the welfare state were affected by retrenchment and neoliberal restructuring. Privatization, workfare and targeting became the leitmotivs of this strongly ideologically driven assault on the welfare state. In an effort to weaken the unions, the government launched an onslaught on the arbitration system with the consequence that the last pillar of the wage earners’ welfare state was dismantled. In addition, the political right has either attempted to bypass the unions in policy-making or deliberately weakened their power resources. No similar attempt was made by govern-ments of the left.

Even though partisan differences have weakened compared to the post-war years, political parties still had an impact on the translation of common goals – such as activation or improving the family–work balance – into practice. Ideology loomed large in family and labour market policy. While the left is more inclined to policies supporting a dual career model, right-wing parties (and Christian Democrats in particular) opt for higher cash ben-efits, longer spells of parental leave and freedom of choice. Where the labour market is concerned, parties of the right retrenched cash benefits more radi-cally than parties of the left. In terms of activation, there are party differ-ences with respect to the balance of duties and social rights and the choice between workfare-based strategies and more human-capital-oriented types of activation. Partisan differences are less pronounced in pension and health policy. This is not to say that party ideology is irrelevant, but the sheer size of these two programmes makes them a major electoral battleground.

In addition to parties and the policy inheritance, political institutions play a role in explaining differences in welfare state restructuring. This is most impressively exemplified for the two extreme cases in this respect, namely, New Zealand and Switzerland. As we will see, however, it is important to differentiate between the short-term and long-term effects of political insti-tutions on policy change. New Zealand’s almost ideal-typical Westminster democracy facilitated major policy shifts within a short period of time. Changes in the partisan complexion of government therefore often went along with policy reversals. Despite frequent policy shifts and an unusually high degree of policy experimentation, the country quite frequently ended up with policies similar to those it started with decades earlier. Healthcare is arguably the best example of policy reforms that occurred in such a stop-and-go manner. In the long-term perspective, however, reform activities oscillated around the long-term trend with little fundamental change taking place as compared with the situation in the mid-1970s.

In contrast to the striking short-term policy shifts in New Zealand, policy change occurred in an incremental manner in Switzerland. Since the Swiss government is a collegial body consisting of four (currently five) parties, and because cantons and interest organizations are formally incorporated in pub-lic policy-making, decision-making is typically negotiation-based and often


very protracted. Thus, in order to act in situations requiring quick decisions, the government sometimes had to rely on urgent decrees. Overall, however, the strong fragmentation of power led to gradual policy changes rather than to radical policy shifts. Incrementalism was reinforced by the institutions of direct democracy. Swiss policy-makers are always mindful that they operate in the institutional shadow of the (optional) referendum. Averting a refer-endum is the ultimate goal of Swiss consensus democracy. This is typically achieved by accommodating the interests of the most powerful parties and pressure groups, who are able to launch an optional referendum. However, since it has become increasingly difficult to reach compromises in the recent past because the deteriorating economic situation has hampered log-roll-ing, the number of referendums has increased significantly since the 1990s. However, a series of incremental policy changes in the short run may none-theless add up to a quite significant policy shift over the course of time. Since the mechanism of the referendum as practised in Switzerland in recent decades seems to have constituted an institutional ratchet against welfare state dismantling, the overall direction of policy change has been a creeping expansion of the welfare state, which ended up in regime transformation in the long run.

Austria and Denmark are located between these extremes. Partisan veto players, corporatism and, in the Danish case, minority governments are the most important factors in explaining the incremental and compromise-based adjustment path that has prevailed for much of the period under examina-tion here. It is thus hardly surprising that the most far-reaching changes occurred either when corporatism was deliberately suspended by the politi-cal right or when a party, like the Austrian Social Democrats in the 1970s, was able to form a single-party government.

Conclusion

The social policy changes described in this chapter do not support the notion of a dismantling of the welfare state. Retrenchment in some policy sectors, notably unemployment cash benefits, was compensated for, if not overcom-pensated by, expansion in other areas, such as family policy or long-term care. We therefore can, by relying on a ‘Sinatra inference’, draw the powerful conclusion that the welfare state’s chances of survival are very favourable across all OECD countries. A generous welfare state and economic openness are still compatible in a world characterized by an unprecedented degree of economic and financial integration. The fact that the welfare state has sur-vived despite a massive increase in economic integration suggests that the effects of increasing economic globalization are by no means all negative as the conventional version of the efficiency thesis suggests. In line with the efficiency thesis, we argue that the convergence of small states’ social policies may be explained by increased openness to global finance. However,


the fact that these ‘most likely cases’ have not simply converged towards a liberal, residual workfare model but, on the contrary, have found a variety of supply-side responses to the challenge of the global economy suggests that the efficiency thesis has to be reformulated in less negative terms. This revised version can then be tested against the experience of a larger sample of both small and large countries – a task that lies beyond the scope of this chapter.

A final, and related, aspect that should be briefly mentioned is the excep-tional economic performance of our four small states in the global economy.4 Trade is an important source of economic growth which may generate the fiscal resources necessary for the viability of the welfare state in the long run. As in the past, this requires economic specialization, and it seems that our small countries have been successful in implementing large-scale structural changes and in occupying new niches in world markets in order to reap the benefits of the international division of labour. Apparently, small nations were able to find a supply-side-oriented adjustment strategy that could rec-oncile the economic imperatives generated by globalization with solidarity. Although we observe similar welfare state reforms in many countries across the OECD world today – that is, also in the big states – the small countries examined have been more successful in terms of economic performance. Admittedly, some nations have characteristic economic Achilles’ heels, but overall they show an above-average economic performance (Obinger et al. 2010). In sum, small is still beautiful even if small countries did not always adhere to the rules of fair play. A case in point is the ‘beggar my neighbour’ strategy practised in the area of corporate taxation. The question, however, is whether that success story of small states is sustainable beyond the current financial crisis. Given the small states’ past record of success and political flexibility, there is every reason to predict that small states will also weather the turbulences generated by the current economic crisis.

Notes

1 In addition, eligibility to second-tier pensions was modified in Switzerland with a view to including more atypical workers.

2 Only New Zealand is an outlier with respect to more extreme forms of old-age pov-erty being addressed by new or expanded minimum-protection schemes. However, New Zealand already had a strong minimum pension by international standards.

3 This general trend to introduce or expand paid parental leave schemes, including to fathers, has one exception: Switzerland.

4 We do not, however, claim that small countries in general show a superior per-formance, as there is no significant correlation between macro-economic perfor-mance and country size for a large country sample.

207

11Policy Change in Secondary Education: Germany and England ComparedPhilipp Knodel, Kerstin Martens and Dennis Niemann

In many OECD countries, education policy has been transformed over the last decade.1 In response to labour market demands, increasing costs for pub-lic education institutions and demographic challenges, the education sector has gradually come under growing pressure. Most significantly, international organizations (IO) have started to play a central role in education policy-making by developing new forms of governance for that field. As a result, education policy – traditionally considered an exclusive national domain of Western welfare states – has become a highly contested area of international governance (Martens et al. 2007). Yet it is not clear what kind of effect the activities of IOs have: Do they bring about greater harmonization among national education policies by promoting uniform solutions for commonly shared problems? Or do national institutions continue to follow their own logic, thereby hindering effective coordination through IO governance?

In this chapter, we focus on the question how IOs influence national policy-making in secondary education. Our main argument is that a constructivist-inspired approach highlighting the importance of ideas provides useful insights into the mechanisms of IO influence in education policy. This approach relies on ideas as causes for policy change with IOs acting as generators and promulgators of educational ideas.

We focus on the effects of arguably the most significant international initiative in secondary education, namely the OECD’s Programme for International Students Assessment (PISA). PISA is the largest international comparative education study, surveying the competencies and skills of 15-year-olds at the end of compulsory schooling (www.pisa.oecd.org). Between 2000 and 2014, the study was conducted five times (in 2000, 2003, 2006, 2009 and 2012), and the results were always published in the following year. PISA evaluates ‘education systems worldwide every three years by assessing 15-year-olds’ competencies in the key subjects: reading, mathematics and science’.2 The survey emphasizes one of these subjects in each assessment cycle. PISA covers far more than the 34 members of the OECD; it is the most comprehensive international assessment of educational

208 Policy Change in Secondary Education

skills to date and the first IO study to systematically analyse and compare academic performance across 75 different countries and regions.3

In this chapter, we analyse two countries that vary in the degree of change in their respective education policy. While Germany has substan-tially reformed its education system in response to its mediocre PISA results, almost no change could be observed in our contrasting case, England (since the United Kingdom actually comprises four different education systems, we chose to concentrate on the English one).

Our focus will be on alterations and shifts in ideas on education policy. Since the 1980s, the paramount aim of education in England may be char-acterized as boosting individual productivity and fostering human capital, which is relatively close to the OECD economic paradigm of education. By contrast, the idea behind education in Germany was traditionally primarily self-fulfilment, an idea which was not aligned well with the economic con-ception of education promoted by the OECD. In short, by changing German ideas about education, the OECD prepared the ground for comprehensive reforms.

The empirical parts of this chapter are based on a qualitative approach and expert interviews (Peabody et al. 1990; Tansey 2007). In 2007 and 2008, we conducted 30 semi-structured elite interviews in Germany and England. The focus was on policy-makers and spokespersons of important stakeholders in the education sector. In order to gain an in-depth understanding of our cases, we supplemented the findings from the interviews with policy docu-ments and statements found in newspaper articles.

International organizations as purveyors of ideas in education policy

Although IOs play a central role in almost all policy fields, most of them only have limited direct governance capacities at their disposal. In interna-tional relations theory, the use of soft governance by IOs has been elaborated convincingly from a constructivist perspective. Scholars look at how, in the absence of legal means or material coercion, IOs influence their member states as ‘teachers of norms’ (Finnemore 1993, 1996; see also Barnett and Finnemore 2004). To measure IO impact on national education policies, they examine how IOs set norms, form opinions, blame and shame, provide financial incentives or technical assistance, coordinate activities and offer consulting services (McNeely and Cha 1994; Nagel et al. 2010).

The OECD is a case of an IO that exerts soft governance. It provides incentives for compliance by idea production and promotional activities, and by policy evaluation and data production (Martens and Jakobi 2010). It is endowed with only modest legal and financial means and cannot enforce or implement policies in its member states. It relies on convinc-ing arguments and persuasion (Marcussen 2004). Particularly in education

Philipp Knodel, Kerstin Martens and Dennis Niemann 209

policy, the OECD has only limited competences (Henry et al. 2001). Even participation in the PISA study is voluntary; each state’s participation and the continuation of the programme as a whole have to be renewed every couple of years. Although PISA is not the first large international education study, it is the most encompassing comparative assessment of secondary schooling to date. With PISA, the OECD has become a successful policy entrepreneur and a potential driving force for transformations in education policy (Nagel et al. 2010).

Having governance capacity is a necessary but not a sufficient condition for IOs to influence national policy-making. Whether or not an IO’s soft governance is factored into national political life crucially depends on its reputation. IOs with a good reputation are accepted as sources of infor-mation because they provide apolitical, technocratic expertise (Barnett 2002, 113). As Sharman states (2007, 30), the impact of IO outputs such as published reports ‘is inseparably bound up with judgments about the reputation of that institution’. While the outputs of other IOs with poorer reputations can more easily be ignored by states and domestic actors, the outputs of acknowledged IOs can have repercussions on national policy dis-courses. In general, the OECD is an IO with a high institutional reputation (Sharman 2007, 31–2). With its PISA study, it even advanced to the status of an ‘éminence grise’ (Rinne et al. 2004) in education data collection and analysis; its studies are therefore highly regarded.

To reconstruct how and to what extent the PISA study is received at the national level, one has to take into account a country’s domestic factors, which determine whether and to what extent IO governance can in fact impact a country’s political affairs. To this end, scholars often look at the institutional set-up of a country in order to analyse its capacities for change. However, such an approach has also been criticized for being too static to explain change convincingly (Béland and Cox 2011). As a consequence of such criticism, the turn towards ideas became a fruitful avenue in compara-tive politics and in international relations theory for overcoming the limits of the institutionalist approaches in explaining policy change (for an over-view, see Blyth 2003). In this chapter, we thus concentrate on the ‘mismatch’ between the ideas on education policy as proposed by the OECD in its – in our words – ‘most economic approach’ (MEA) and the existing domestic ideas on education, and we do so to account for changes in national educa-tion policy. From this perspective, IO conceptions and frameworks are seen as modifiers of ideas that shape the national discourse and influence policy-making at the domestic level.

Since the term ‘ideas’ may have a variety of meanings, we have to specify how we understand ideas in the context of our study. Basically, we follow Béland and Cox (2011, 4) in conceiving ideas as causal beliefs that ‘provide guides for action [and help] to think about ways to address problems’. Ideas are thus cognitive frames for interpreting an issue, identifying a problem


and choosing the appropriate solutions. In fact, ideas can operate at different levels (in the public, political or elite arena) and have a range of influence on a scale from fundamental (for instance, neoliberalism) to specific ideas (for instance, concrete policies and practices).

Ideas are not just tools for strategic actors (Lieberman 2002, 699); they need agents to be disseminated but can also serve as actors’ instruments for making and staking claims. Thus, we accept the premise that the perception of reality is a product of an actor’s constructivist interpretation. Or to para-phrase Wendt, actors want what they want because of how they think about it (Wendt 1999, 119). How one thinks about something is strongly influ-enced by ideas, which serve as ‘cognitive filters through which actors come to [. . .] conceive of their own interests’ (Hay 2011, 69). As a consequence, a change in ideas may also bring about a re-assessment of policies and policy goals. In this regard, ideas matter in the policy-making process insofar as ‘policy actors may define – and redefine – their interests and preferences in terms of cognitive and normative factors, thereby linking ideational and institutional change’ (Baldi 2012, 1003).

A central contribution of IOs such as the OECD is to activate and promote a conception that accords with its purpose and goal. Then, the OECD func-tions as a ‘purveyor of ideas’ (Mahon and McBride 2008, 3). In other words, the OECD appropriates ideas, adopts them to its own institutional vision of the world, cultivates them within the organization and disseminates them in the member countries through diverse channels such as reports, studies and symposia. Moreover, the ideas about education the OECD lobbies for are also embedded in its own wider framework of ideas. Given that the OECD was founded to achieve economic growth and employment in its member coun-tries, its understanding of education would seem to be obvious: Education ‘plays a critical role in enhancing economic competitiveness and growth, facilitating personal development and building strong and healthy societies’ (OECD 2006, 5). Overall, the OECD cultivated the interaction between the economic and educational spheres by drawing from human capital theory (Rubenson 2008). As regards secondary education, this economic paradigm is reflected in OECD recommendations on investment in education, on evaluation, flexible school degrees, school autonomy and individual support for students (Henry et al. 2001; Popp 2010; OECD 2010/2011, 1–3).

We can generally distinguish two major ideal types in ideas about educa-tion. From a neoliberal economic perspective, education is a means to improve the competitiveness of a national economy. By raising and increasing human capital, it increases productivity and generates or enhances a nation’s wealth. From a societal perspective, education is crucial for achieving social cohesion, as it is a means to create a national collective identity and consolidate democratic participation. When providing a national curriculum, promoting a common language or disseminating a common history through the education system, education is also helpful in overcoming the reproduction of social inequalities,


as it increases the chances of each individual to participate in society. In addi-tion, it can be a means of self-fulfilment and personal refinement through participation in a collective cultural enterprise (Nagel et al. 2010, 15).

We expect national education policies to be changed conforming to the OECD’s MEA, first, when there is a mismatch between national principles and ideas on education and the conceptual framework promoted by an IO with a good reputation and, second, when there is an incentive for policy change created by a problem’s urgency. While problem pressure opens the window of opportunity for policy change, the mismatch argument helps to assess the direction of change. Thus, change takes place when the inter-nationally promoted model – take the conceptual framework of the PISA study – and the nationally predominant understanding of education do not match. Such a mismatch creates opportunities for political learning and a redistribution of power resources (Börzel and Risse 2000, 5). Overall, PISA is not neutral. It evaluates education against predefined economic and utilitar-ian criteria and leaves out other aspects of education that are also tradition-ally seen as an integral part of that process. In our comparative study, we show that the German understanding of education was incompatible with the OECD’s MEA, whereas the English ideas on education and those pro-moted by the PISA study were more in sync.

Germany: Educational reorganization through PISA

‘Profound’ and ‘tremendous’ are two adjectives used to describe the changes that have taken place in Germany’s secondary education in the last decade. In a policy field that had not experienced any major reform attempts since the mid-1970s, the reforms of German education policy-making that took place after the turn of the millennium were far-reaching and astonishing. In a nutshell, these multifaceted policy changes brought with them a general turn to evidence-based policy-making and output orientation. However, the stimulus for reform enthusiasm came from outside Germany: The OECD’s PISA study impressively highlighted the German weaknesses and the medi-ocrity in educational matters compared to its peer countries and prompted comprehensive reform efforts (Niemann 2010). With its PISA study, the OECD unleashed massive reform pressure on Germany’s education system and exerted a sustained influence on German ideas regarding the purposes of education. The reforms were geared towards the OECD’s MEA and may be seen as a direct response to the intervention of the PISA study.

Generally, the German education system is characterized by somewhat reform-resistant structures hampered by joint decision-making, since educa-tion policy is a core competence of the Länder. In consequence, the rapid implementation of comprehensive education reforms is, as a rule, unlikely. However, this has not been the case here. Comprehensive reforms did take place and the German Länder collectively consented to reform secondary


education. As argued in this chapter, the extensive reforms were possible because the OECD brought considerable pressure to bear on Germany and its Länder to adapt, and it managed to shift the emphasis in German ideas about education from social cohesion to economic rationality. Combined with the weaknesses of the German educational performance identified above, the mismatch between Germany’s traditional ideas on education and the MEA of the OECD created huge pressures for Germany to reform its secondary education system in line with the recommended economic orientation of education, which the Germans in the end interpreted as a more promising strategy for producing better outcomes.

PISA: A turning point in German education policy

Before PISA, Germany’s education system was hampered by a general backlog of reforms, a political system that was not conducive to reform, and a non-existent culture of (outside) evaluation. Structurally, German education policy is a classic example of ‘joint decision-making’ (Scharpf 1988). Education policy is a matter of subsidiarity in Germany: The 16 Länder are wholly responsible for this policy field. Hence, the authority of each Land to shape its own education system makes coherent country-wide reforms rather difficult (Gruber 2006, 200).4 Nonetheless, the institutions that coordinate German education policy amongst the Länder prevented dissent among the 16 education subsystems. While differences between the education systems of the Länder do exist, they are not completely incompatible, since vast dis-parities are not tolerated given the high general pressure for uniformity in the German socio-political system (Wolf 2008, 21–2). In recognition of the need for horizontal coordination, the Standing Conference of the Ministers of Education and Cultural Affairs (Kultusministerkonferenz/KMK) serves as the main coordination body between the Länder.

As far as the school sector is concerned, the crucial inherent feature of the German system is a selection process at the age of about ten: Based on their abilities, pupils are tracked into one of three school types (Ertl and Phillips 2000, 393). Although this selection system was fundamentally criticized and contested in the past, no major effort was made to abolish it. Furthermore, the German education sector was traditionally highly input-oriented (Gruber 2006, 202). This meant that there was no tradition of assessing the outcomes of the education system.

The decomposition of the old structures of German education policy- making was accelerated by the publication of the OECD’s PISA study in 2001. With the exception of the Trends in International Mathematics and Science Study (TIMSS) in 1995, Germany’s participation in comparative studies was a recent development in education (Bos and Postlethwaite 2002, 254). PISA shook Germany’s educational self-perception as a leading ‘ knowledge society’ at the core and caused a landslide of reforms in the Länder. Essentially, PISA revealed that compared to other industrialized countries, Germany’s


performance in education was mediocre at best. This was completely the opposite of what had been expected: Germany had perceived herself as a top performer in education. That was ultimately exposed as an illusion by PISA. The first PISA report, published in 2001, showed that in all of the three tested areas of academic competence, the performance of German students at age 15 was significantly below the OECD average (Baumert et al. 2001). Besides the poor general results, it also came to light that Germany belonged to those OECD countries that had the highest level of performance variation across students. In no other industrialized country was academic success determined to such a high degree by socio-economic background or migrant status as it was in Germany, and the education system seemed incapable to reduce social inequalities.

Public reactions were surprisingly severe. Prompted by the much publi-cized and oft-cited ‘PISA shock’ in late 2001, a re-evaluation process of the central goals and principles in education started. While education had long been considered a topic for experts and elites only, it was now catapulted into public awareness and eventually became a major issue in public dis-course (Lundahl and Waldow 2009, 377). A media assessment of newspaper articles dealing with matters concerning PISA underscores this diagnosis: Until 2012, Germany belonged to the top three OECD countries regard-ing the number of articles published on PISA-related topics (Martens and Niemann 2013). Confronted with massive pressure caused by the negative results and heated public reactions, political stakeholders began to introduce comprehensive reform measures in education.

The turn in the leading ideas from social to economic principles

Prior to PISA, Germany’s idea of a holistic education was to educate in order to create social cohesion and enhance individual prosperity. After the first PISA study, the emphasis has been shifted increasingly to a more economic approach, underlining the importance of education for boosting national and individual productivity. In the aftermath of PISA, education became a topic that was discussed in terms of activating human capital for the national economy and the welfare state.

The emergence of PISA may be identified as a decisive turning point in Germany’s conception of education. This is not to say that an economic understanding of education was completely absent or irrelevant in the German education discourse prior to PISA, but it was generally reined in by the ‘old’ idea that education should guarantee social cohesion and culti-vate self-refinement. Currently, the German debate on educational ideas is dominated by evaluations of academic performance seen through the lens of economic usefulness.

While traditionally the notion of social cohesion (including the internali-zation of democratic values) had prevailed, the idea of competition and per-formance only came into focus in recent years. Generally the awareness grew


of the significance of education not exclusively being a means of improv-ing people’s individual lives but rather being an integral part of making a positive economic contribution to society (interview, KMK). Even social cohesion is increasingly viewed in economic terms: People who are not well educated have fewer chances of employment and thus cannot contribute to national development and welfare (interview, KMK); consequently, it is implied, severe divisions could emerge and split German society.

This does not mean that the traditional idea has become obsolete. Aspects of education other than economic factors are still regarded as important (interview, German teachers’ union Gewerkschaft Erziehung und Wissenschaft/GEW), but they are no longer seen as decisive. In public discourse among different social and political actors, it is now widely accepted that education is essential for activating human resources and encouraging national pros-perity (interviews, Bavarian and North Rhine-Westphalian ministries of edu-cation, GEW, KMK and Federation of German Employers’ Associations/BDA). On the whole, the replacement of the old idea happened rather abruptly and not in a gradual process. It was the OECD that primarily created the precon-ditions for this shift in perspective. As we will show in the subsequent sec-tion, the OECD succeeded in projecting its conception of a quite economic interpretation of education onto the national German level, and thus trig-gered and facilitated a radical policy turnaround.

Sweeping school reforms after the PISA shock

After the fundamental reform processes in the late 1960s and early 1970s, and before PISA, the German education system had accumulated an immense reform backlog. Even after German reunification in the early 1990s, most major reform measures only came to pass in the Länder of the East (Wilde 2002). However, since the late 1990s, numerous reforms have occurred in education.

The awareness that there was a dire need for education reform had already spread slowly in that decade (Baumert et al. 2001, 137) and it was crystallized by PISA, ‘after which the educational policy-making discourse and patterns of educational policy-making [. . .] were altered fundamentally’ (Lundahl and Waldow 2009, 377). In late 2001, in the aftermath of the poor PISA results, Länder delegates to the KMK agreed on an action plan that provided a long-term framework for substantial education reforms. The main empha-sis was placed on early education in order to lay the ground for improved academic performance in schools and to level the playing field for children from different socio-economic backgrounds (Carey 2008, 17–21). Also, the KMK catalogue of measures included support programmes for under-privileged pupils, especially those with an immigrant background. It also mandated the expansion of quality assurance, improvements in the method-ological and diagnostic skills of teachers and greater opportunities for edu-cation and advancement through the extension of all-day school services


(KMK and BMBF 2008). In order to improve the quality of education, the focus was shifted to empirical evaluations of outcomes. In 2002, the KMK agreed to introduce common educational standards (starting in 2004) and to establish a central agency to monitor the compliance with them (Nieke 2003, 201). Since 2009, the Länder have continuously reviewed and compared their standards (KMK and BMBF 2008), and established procedures to review individual schools through external assessors.

After all these changes in education policy-making, educational research now plays an important role in shaping and justifying education policy (interview, Federal Ministry of Education and Research/BMBF), and steps have been taken to rely routinely on evidence-based policy measures. Today, political stakeholders increasingly build on the expertise of institutions and scientific advisors in decision-making in order to identify crucial problems and solutions for them. Several institutions have been set up to develop, operationalize and review education standards. The implementation of quality assurance, educational standards and evaluation mechanisms may be characterized as an ‘empirical turn’, which reflects a major turnaround in German education policy-making.

In sum, German state authorities disbanded their strategy of detailed input control in favour of providing no more than a strong conceptual framework for secondary education. Prior to the reforms the state authorities regulated curricula and stipulated what must be taught; now they prescribe, based on a set of standardized indicators and educational standards, what competences a student should achieve, thus clearly shifting towards an output orientation.

Promoting ideas: The OECD and the economic turn in German education

The role of the OECD in this process was decisive. Besides providing the incentive for reform by profiling the weaknesses of the German education system, and hence opening a window of opportunity for remedial action, the OECD crucially influenced Germany’s understanding of the purpose, the idea of education. First and foremost, the OECD framed the discussion as mobilizing unused human resources by providing better education. The interaction between education and economic policy came into focus, and PISA was able to tie this into ‘the debate about Germany’s economic perfor-mance and the educational system’s ability to provide education according to the economy’s perceived needs’ (Lundahl and Waldow 2009, 378). This interpretation conflicted with the non-economic understanding of educa-tion that had hitherto been dominant in Germany. As shown in the assess-ment of German ideas about education above, recent debates in Germany mostly accept the redefinition of education as an economic factor. Here the OECD was highly successful in disseminating its economic understanding of education and it paved the way for integrating this new understanding into the reform measures in German secondary education.


Since the OECD had no legal leverage on national education policy, it could influence German secondary education policy only by triggering pub-lic debates and by creating informal pressure on Germany to adopt its MEA (interview, North Rhine-Westphalian ministry of education). The pressure to reform secondary education triggered by PISA also bypassed the usual veto points of German federalism in a politics of stealth and led to con-sistent reform efforts across Germany. As the OECD has only tools of soft governance at its disposal, its ‘strategy’ for influencing German concepts of education, thus making structural reforms plausible, was to pass the new conception through the back door in a series of interrelated steps.

First, the PISA study highlighted that the German sector of secondary edu-cation was not producing satisfactory outcomes; students’ performance was below average everywhere. The OECD assessed the results in the light of eco-nomic forecasts for Germany’s overall performance in the coming decades and concluded that it did not suffice to have a well-educated elite while a huge percentage of students were left behind by the education system (inter-views, North Rhine-Westphalian ministry of education and GEW). Overall, the OECD framed an understanding of general education as a fundamental prerequisite for economic prosperity.

Second, although it does not offer direct recommendations, PISA pro-vides hints on best practices. The ‘winners’ in the league table (for instance, Finland and Canada), which have comparable cultural and social structures, are presented as blueprints or role models for a successful schooling system. Without making any direct references, the OECD recommends features of the school models of the PISA winners as worth adopting. Taken together, PISA and the OECD primarily created an ‘air of competition’ about edu-cational matters, which were translated wholesale into issues of economic welfare.

This shift in focus meant that German political forces that favoured an economic approach to education were provided with sound, empirically grounded arguments from a well-acknowledged institution outside the country. Actors therefore now expressed their educational demands based on economic reasoning. In the light of the PISA results, informal actors such as interest groups and foundations from the economic sector also increas-ingly began to intervene in educational politics. They advocated better edu-cation performance in order to increase the supply of qualified employees and, hence, improve economic performance (interviews, Bavarian ministry of education, GEW and BDA). By addressing the topical field of economic performance, they gained leverage on the education policy-making process and created a feedback loop that changed the old or reinforced the new ideas of German education.

In essence, the OECD not only promoted its economically oriented frame-work of education but also compelled Germany to adapt its instruments for assessing the performance of schools. This shaped the conduct of education


policy-making. Furthermore, with its PISA study, the OECD supported the already existent efforts of some Länder to reform secondary education (inter-view, Bavarian ministry of education). Reform schemes that had already been compiled but had not yet reached the political agenda received increased attention after PISA and provided the basis for the reforms.

England: No need for PISA

While Germany only recently recognized the need for education reforms, England had started to modernize its education system more than a dec-ade earlier – without OECD help.5 The 1988 Education Reform Act was a milestone in English education policy, changing the whole secondary education system and shifting policy towards marketization. The key ele-ments of the Act were the introduction of a national curriculum, which set minimum standards for skills and content, the delegation of budget control to schools and a new system for testing students and measuring schools’ performance (Eurydice and CEDEFOP 1999). The main effect of the Act was that providing education through the state was brought in line with market principles. Parents were now able to compare the schools’ performances, new types of schools such as the grant-maintained schools provided alter-native choices, and the option of publishing test results increased pressure on poorly performing schools. In short, power shifted from local education authorities to the central government, schools and consumers (John 1989). Subsequently, a number of reforms established what can best be described as ‘quasi-markets’ (for an overview of the reforms, see Whitty 2002). In this regard, England became an early prototype of the neoliberal education model.

England’s education policy over the past 20 years is characterized by overall continuity. Although the education system has been constantly reformed since the 1980s, there are distinct commonalities between Conservative and New Labour education policy (Power and Whitty 1999), and these key elements are still important today. Throughout these reforms, international comparative assessments did not play a major role – the English system had already undergone its major fundamental reforms before the PISA study. Moreover, these reforms were already very close to the OECD’s later blueprint for education policy.

PISA: A non-issue in England

The 1999 assessment of the International Association for the Evaluation of Educational Achievement (IEA) already revealed the weaknesses of the English education system: English students scored below average in a com-parison with other countries (IEA 2000). Expectations of achieving good results in the first PISA study were therefore modest. With the publication of the results in 2001, however, PISA suddenly gained attention. English


students scored higher than expected, coming eighth in literacy and maths, and even fourth in science. As The Times (2001) put it, students of English schools ‘have been transformed from global dunces into worldbeaters’. In the second and third PISA surveys, the average reading score had dropped, and in maths the results even fell below the OECD average, although they were still well ahead in science. However, the interest of the public and of policy actors in this international assessment declined despite the deteriorat-ing performance in English (OECD 2006).

Overall, no institutional changes have been made in response to England’s scores in the PISA study. PISA did not bring about any innovative measures given the already strong tradition of testing in English education. In contrast to many other European countries, the outcomes of the education system had already been continuously assessed and monitored in England for dec-ades. For many, participation in the PISA study was just another burdensome task: ‘We do the PISA, another morning off, we do another test’ (interview, National Association of Head Teachers).

Economic ideas of education

Generally speaking, the notion of a liberal education has always predominated in England (Miller 2007, 185). Students are taught a curriculum of subjects to cultivate the self. The principled idea of education was ‘self-justifying, an end in itself’ (Sanderson 1993, 189). A liberally educated mind, trained in an abstract discipline, it was argued, could apply itself to any subject matter. Moreover, during the late nineteenth and early twentieth centuries, a liberal education was associated with views about social class. These Victorian prin-ciples of education were preserved in public schools and the Civil Service and passed on throughout the twentieth century (Sanderson 1993, 190).

Concepts of justice and equality in the post-1945 welfare state settlement have also infused education practice. Under the 1944 Butler Act, education was made available at no cost for all students. This was an integral part of preventing all of Britain from returning to ‘the stagnant, class-ridden depress-ing society of the 1930s’ (Simon 1991, 35). The Butler Act gave schools and teachers a large degree of autonomy, but the majority of local education authorities in England failed to exercise control over the curriculum and other policies (Chitty 2002, 263). In the 1970s, concerns grew about the state of England’s education system in general and the autonomy awarded teach-ers in particular (Woods 2002, 121). In a famous speech at Ruskin College, Oxford, in 1976, Labour Prime Minister James Callaghan responded to these concerns. He set out a number of key concepts that would resonate in educa-tion policy over the next decades, for example, the need to question teacher autonomy and the importance of value for money in education expenditure (Kelly 2004, 174–6).

Thatcher’s Conservative Party returned to the Victorian ideas of education in the 1980s, emphasizing individual freedom of choice and competition. The


New Right fundamentally criticized the collectivism of the welfare state and reinvented a ‘form of Victorian laissez-faire individualism’ (Ball 2008, 75). In general, such an economic understanding of education is also part of New Labour’s political rhetoric. Invoking the constraints of globalization, Prime Minister Blair’s education policy in principle followed the policies of his Conservative predecessors (Power and Whitty 1999). New Labour con-tinued to emphasize the importance of education particularly for individual productivity and the country’s economic performance. As Blair put it in a speech to the Labour Party in 2006, education is crucial for ‘economic stabil-ity, the modern knowledge economy, with the skills, dynamism, technologi-cal and scientific progress a country like Britain needs’. Furthermore, he saw education as the chance for individuals to ‘correct the inequalities of class or background’. The British ideas of education thus come very close to the OECD’s economically oriented framework for education.

Dynamics in England: Emerging discourse and competition

With regard to the PISA study and other international comparisons, the government employed a ‘pick and choose’ strategy. The reception of the PISA surveys in England shows that the government used positive results to prove its good governance while ignoring or trying to ignore negative results. Yet, in the British case, the PISA results were handled in a singular way. In England, Wales, Northern Ireland and Scotland, several separate OECD sur-veys were conducted. In 2000, the response rate among the schools initially selected for the English survey fell below the 65 per cent level required by the OECD. Nevertheless, the OECD accepted the data as having met the required technical standards and included Great Britain as a whole in its PISA publica-tions and statistics (Micklewright and Schnepf 2006, 2).

Unlike 2001, the PISA results for 2003 became a politicized issue in England. Although the response rate was only marginally lower than in the previous survey, the government opposed England’s inclusion in the PISA statistics. The results were much worse than in the previous PISA study, and the gov-ernment convinced the OECD that the data could not be reliably compared with the performance scores for England from the 2000 study or with any other country. The government insisted on being left out on the grounds of the low response rate (The Economist 2004). As a consequence, England’s results from the PISA study in 2003 were not published and England was not included in any OECD publication of this PISA wave. In hindsight, concerns about biases in the PISA results turned out to be unsubstantiated and the response rates were only slightly different from those of many other partici-pating countries. Later analysis also showed that the data would have been comparable with that of other countries, since it is possible to assess the mag-nitude and direction of response biases reliably (Micklewright et al. 2010).

In 2006, the response rate was sufficient for the English scores to be compared to other national-level data in the report. In that year, however,


the average reading scores dropped as against the first PISA wave. While England’s results in science were still above the OECD average, the results in maths fell below it. Considering all three PISA surveys up to that year, the latest survey confirmed an overall decline in English performance (OECD 2006). This decline happened in a political period in which the prime minis-ter’s three main priorities for government were ‘education, education, educa-tion’, and hence it is rather remarkable that the poorer PISA results in 2006 generated only slightly increased media attention in England (interviews, Department for Children, Schools and Families/DCSF and Universities UK; see also Grek 2008).

PISA sparked off a political discourse in England, however, that has led to a growing recognition of other countries’ education policies. English political dialogue, which has never been very outward-looking, has begun to change ‘because of the concern to be world class’ (interview, Office for Standards in Education, Children’s Services and Skills/OFSTED). As a member of a govern-ment department reported, political actors in England have started looking at other countries such as Finland, which scored higher in terms of participa-tion and performance (interview, DCSF). To put it more drastically, ‘in the war to create the world’s best schools, the fight’s to the Finnish’ (The Times 2009). In recent years, political actors have learned that they have to com-pare England’s performance with that of other countries (interview, British Council). The English policy actors want to understand the reasons for the success of other countries, and if possible, they would like to use their ideas in domestic education policy: ‘What are these countries doing that is dif-ferent from us?’ (interview, Qualifications and Curriculum Authority/QCA). Thus, for politicians, one reason for engaging with multinational bodies is ‘to find out what others are doing and learn from it’ (interview, Department for Innovation, Universities and Skills).

This awareness of the impact of international comparisons did not grow overnight; rather, it has been a ‘gradual progressive realization’ (interview, OFSTED). What has changed, however, is the attitude of political actors towards the work of the OECD. Today, OECD studies and publications are taken more seriously (interview, Labour Party). Political actors have noticed that PISA has meanwhile become a ‘brand name’ in England, too, well- marketed by the OECD (interview, DCSF). They have started outlining concepts for improving England’s performance in the PISA study (interview, QCA). In the words of a DCSF official: ‘We are incorporating that into our policies’ (interview, DCSF). To date, however, there is no evidence of any policy initiatives in English secondary education in response to the PISA results. The emerging discourse can nevertheless be understood as being a part of more general debates about globalization, knowledge economies and education policy (Ball 2008).

In sum, because of the congruence between the OECD’s understanding of education and English secondary education, PISA did not trigger any major


institutional reforms in England. While the national ideas of education in Germany were at odds with those of the OECD, English ideas were much more in sync with the conceptual framework of the OECD, particularly because of their primarily economic perspective. This cancelled any impact of PISA at first. However, a political discourse on PISA and English educa-tion has gradually emerged: PISA revealed and named other countries like Finland that have a similar understanding of education. But these countries have implemented their ideas of education much more efficiently than the English (Knodel and Walkenhorst 2010), and in terms of the OECD study, they also score better results. Yet, according to former Prime Minister Gordon Brown in a speech on education, the objectives are clear: ‘[. . .] by 2015, we will be in the top three in science and the top five in maths out of all OECD countries. We will systematically assess our performance against other coun-tries, reporting annually on progress’ (Brown 2010).

Conclusion

In this chapter, we have shown that ideas on education can have explana-tory value for assessing policy change in education and that they notably enable us to assess IO impact on domestic education policies. Both Germany and England were faced with suboptimal PISA results, but comprehensive reforms only occurred in Germany, while England continued business- as-usual. First, PISA catapulted education back onto the German policy agenda, revealing the shortcomings of its secondary education system compared to those of peer countries and creating massive reform pressure. Second, the mismatch between national ideas on education and the conceptual frame-work pushed by the OECD gave direction to the far-reaching adaptations of the German secondary education system. In the ensuing debates on public education, an economic understanding of education was disseminated and anchored in Germany by the OECD, and reforms were conducted accord-ingly. As echoed in terms like ‘evidence-based policy-making’ and ‘empirical turn’, the German education landscape was altered according to the OECD’s conceptual framework, which concentrated on economic aspects of educa-tion. Even more strikingly, the changes reveal a shift in ideas from social cohesion to education as a primarily economic factor, fully in line with the OECD spirit.

England, by contrast, had already reformed its education system before the 1990s and established a ‘quasi-market’. The ideas behind these reforms were similar to the conceptual framework of the OECD. Although English results were also below average, policy-makers did not initiate or were not forced into a fundamental debate on comprehensive reforms. Given that there was no mismatch between the English idea of education and the ideas that inspired the OECD framework, there was no reason to expect any dras-tic change. In England, education was already seen first and foremost as an


economic enterprise. On a different level, England’s policy-makers identi-fied several minor shortcomings that became the subject of an emerging discourse on education reforms. Furthermore, through PISA, English policy-makers have learned to broaden their horizons by looking at other education systems and comparing their own performance with countries with higher PISA scores.

In this chapter, we have argued that including ideas about education in research on education policy allows us to understand the influence of IOs on domestic policy-making. A possible next step in research would be to address the issue of how ideas matter and to analyse precisely how national actors pick up and use certain ideas. How do ideas change in an actor’s perception and in relation to other actors? How do actors use ideas as instruments to enhance their influence in education policy-making? A closer look at both England and Germany would enable us to assess which actors succeeded in entering the arena of education policy-making.

Notes

1 This chapter is the revised and updated version of a previously published article by Knodel et al. (2013) in Globalisation, Societies & Education 11(3): 421–41.

2 http://www.pisa.oecd.org/pages/0,3417,en_32252351_32235918_1_1_1_1_1,00.html

3 Regions are, for instance, the Chinese special administrative regions of Hong Kong and Macau.

4 A federal structure in education policy may, on the other hand, facilitate reforms. Individual Länder can act as trailblazers to introduce certain changes without extensive and difficult nation-wide negotiations.

5 Since the education systems in Scotland, Wales and Northern Ireland are histori-cally and politically different, our case focused on England, as already mentioned.

223

12The Hybridization of Healthcare Regulation: An Explanation in Cross-national PerspectiveLorraine Frisina Doetter, Ralf Götze, Achim Schmid, Mirella Cacace and Heinz Rothgang

It has been the principal challenge for OECD healthcare systems over the past four decades to reconcile the public demand for access to state-of-the-art healthcare with the need to control increasing healthcare expenditure. The oil crises of the 1970s heralded the end of a period of continual benefit expansion, while cost containment policies came to dominate the political agenda and efforts to improve the efficiency of healthcare systems gained in importance. This has fundamentally challenged the established regulatory structures of healthcare systems and provoked various adjustment processes.

Accordingly, the major finding to be explained is the hybridization of health-care system regulation – a pattern of change observed across different types of healthcare systems: The National Health Service (NHS), the social health insurance (SHI) system and the private health insurance (PHI) system have all now included elements of regulation that were once atypical for the respective system. This pattern of change suggests that regulatory reforms differ by the type of healthcare system and that they seek to respond to the particular weak-nesses of established regulatory structures. Our ‘ modified problem pressure hypothesis’ therefore suggests that common problem pressure is redirected according to the functional necessities of each type of healthcare system, while the timing and amount of reforms depend on the constellation of actors, the institutions of the political system and the dominant ideas of the time.

We examine this hypothesis in a comparison of five nations: England, Italy, Germany, the Netherlands and the United States. Before we turn to the empirical analysis, we define the concept of regulation and the notion of hybridization as a movement away from one ideal type of regulation to the inclusion of aspects of another. Further, we discuss our explanatory frame-work for policy change and healthcare system transformation. Our empirical

224 The Hybridization of Healthcare Regulation

analysis of five healthcare systems traces policy change over time, focusing especially on the problems related to each type. Finally, we bring our find-ings into comparative perspective and conclude with the benefits and limita-tions of our holistic approach for explaining change.

Types of healthcare system regulation

Healthcare regulation refers to the fundamental relationships between the three main participants in healthcare systems: service providers, financing bodies and users. For our analysis, we focus on the structural features of regulation by examining the actors and the mode of interaction by which the system is coordinated (Tuohy 1999; Rothgang 2006, 2009).

As concerns actors, we refer to three kinds that are relevant for the regulation of healthcare systems, namely (1) the state, (2) non-governmental or societal actors and (3) private market actors. Regarding the interactions taking place between actors, we identify three basic modes of coordination: (1) exerting hierarchical control, (2) engaging in collective bargaining processes where contract partners, aiming at stable relations, interact on equal footing and (3) partaking in competition, which implies rivalry between individuals or groups, and hence more selective and unstable relations.

Linking actors with modes of coordination yields three ideal types of regulation: (1) state hierarchy, (2) collective bargaining of societal actors and (3) competition between private market participants. The ideal types of regulation correspond to ideal types of healthcare systems: NHS, SHI and PHI systems (Rothgang et al. 2010, Chapter 8). At the same time, these types of regulation reflect different forms and intensities of state involvement in the healthcare system (Wendt et al. 2009).

Reality may, in fact, demonstrate that healthcare systems comprise a mix of regulatory actors and various modes of interaction. Systems can be fragmented, with a social self-regulation model existing alongside a private competition model for subsets of the population. Hybridization, however, refers particularly to the mixing of regulatory features going beyond the ideal type, thereby widening the portfolio of regulatory policies.

At the beginning of our observation period in the early 1970s, England, Germany and the United States most closely resembled the three ideal types of state-based hierarchical regulation, the social self-regulation model and private competition-based regulation (Giaimo and Manow 1999; Giaimo 2002; Rothgang et al. 2005). It can be shown that all these healthcare sys-tems have since become more hybrid regulatory structures. Thus the English NHS and the German SHI system have introduced competition among their respective public agencies and public health insurance funds (Rothgang et al. 2010). By contrast, hierarchical elements have been introduced in the private US healthcare system, induced by government regulation but imple-mented and reinforced by private insurance companies.

Lorraine Frisina Doetter et al. 225

Hybridization implies that the trajectory of policy change varies by the type of regulatory system. This finding highlights the role of types of healthcare systems, and the constellation of problems or the functional deficits that they tend to produce, as a point of departure for explaining change in healthcare systems (Schmid et al. 2010). In order to investigate the role of functional deficits vis-à-vis competing explanatory approaches, we provide case studies for five nations. We consider two cases per type of regulatory system, which allows pairwise comparisons. Thus the English NHS case is complemented by Italy, while Germany is paired with the Dutch SHI. The United States remains exceptional as the only private healthcare system among today’s wealthy OECD countries. While this classification has been disputed due to the public components of the fragmented US system, it can be shown that the private nature of financing, providing and regulat-ing healthcare still predominates (Böhm et al. 2013). At the same time, the United States is an important laboratory of healthcare regulation concerning the state, the societal sphere and the market.

Explaining changes in the regulatory structures of healthcare systems

The common starting point for analysing changes in the regulation of healthcare systems is the economic shocks of the 1970s and the end of the ‘Golden Age’ of welfare state expansion. The following decades were strongly influenced by austerity policies, increasing the need to find more efficient ways to organize healthcare and, hence, the demand for policy change (Hacker 2004; Marmor et al. 2005). By the early 1990s, efficiency had become the catchword in the political debate, requiring healthcare systems to implement cost containment strategies while simultaneously achiev-ing (or preserving) state-of-the-art treatments, responsiveness and choice (Wilsford 1995; Hacker 2004).

We embed our study of regulatory reforms in a larger framework of health-care system change that distinguishes various driving forces contributing to problem pressure on healthcare systems from intervening variables rooted in the respective national political economy (Figure 12.1). By examining reforms in this way, we seek a more comprehensive understanding of why change happens and why it takes a particular form at a given point in time (Sil and Katzenstein 2010). Thereby, we attempt to avoid a number of the theoretical shortcomings of traditional approaches to policy change such as the institutionalist emphasis on stability or the functionalist neglect of agency (Wilsford 1994).

As regards our understanding of driving forces, we maintain that factors such as medical technological progress, demographic change and individ-ualization increase both the demand for healthcare and its costs (Frogner et al. 2011). At the same time, in line with a neofunctionalist approach,


globalization is perceived as a constraint to public (healthcare) expenditure (Schwartz 2001), while Europeanization may foster convergence in spending through benchmarks for national governments and restrictions on public budgets (Towse and Sussex 2000; Frisina and Götze 2011). These factors bring considerable pressure to bear on healthcare systems.

However, the exact form of problem pressure arises from the interaction between driving forces and intervening variables. Taking the type of health-care system as an intervening variable, the impact of cost-increasing techno-logical progress, for example, will vary: In NHS systems, budgetary limits will slow down the implementation of innovative treatments and cause respon-siveness problems that may be addressed through private alternatives. Given the open-ended financing system of SHI systems, new technologies tend to increase costs. As a result, within this system type, we will observe more intense conflicts between providers and insurers in corporatist committees that may provoke state intervention to contain costs. In PHI systems, tech-nological progress aggravates the lack of public mechanisms of cost control, consequently producing managed care arrangements to control costs. Thus problems tend to diverge by the type of healthcare system, emphasizing dif-ferent functional requirements and deficiencies (Schmid et al. 2010).

While the direction of policy change may be traced back to systemic prob-lems, the timing of reforms often differs markedly despite similar problem constellations. Moreover, there is variance in the extent and specific design of reforms. Therefore a comprehensive explanatory approach will have to con-sider further intervening variables. These include the perception of problems by relevant actors and also their beliefs about strategies that may improve

Figure 12.1 An explanatory framework of healthcare system changeSource: Schmid et al. (2010).

MATERIAL FORCES

INSTITUTIONAL FORCES

IDEATIONAL FORCES

Globalization

Medical TechnologicalProgress

Driving Forces Modifiers

Political-Economic System

HealthcareSystem Type

Transformations

Demographic Change

Europeanization

Individualization

NAFTA, WTO, WHO

Problem

Pressure

Actors

InstitutionalStructures

Value SystemIdeasPerceptions

Convergence

Common PrivatizationTrends

Blurring ofHealthcare Systems


the efficiency of healthcare systems (Béland 2005; Frisina 2008). Intervening variables will have to be considered with respect to problem definition and agenda-setting, but also with respect to their ability to set the pace of reform. In particular, institutionalist or actor-centred approaches may elu-cidate the potential to resist transformation (Immergut 1992; Giaimo and Manow 1999; Oliver and Mossialos 2005). With this explanatory framework in mind, we examine problems and corresponding reform approaches in five healthcare systems, focusing on factors contributing to the hybridization of regulatory structures.

National Health Service

Generally speaking, NHS systems are characterized by universal coverage based on citizenship and by services that are free at the point of delivery. Consequently, healthcare is typically financed through taxation and services are dominated by public providers. As far as regulation is concerned, relations among financing institutions, service providers and (potential) beneficiar-ies (patients) are mainly dealt with through state hierarchy. NHS systems operate based on budgets, which typically allow better cost containment but also lead to long waiting lists, insufficient investment in healthcare facilities, poor responsiveness and low productivity of providers. These problems are related to underfunding and forms of rationing but also to state failure due to the lack of appropriate incentives for state employees to use funds efficiently and to stay in the public system (Schmid et al. 2010).

England

Since its inception in 1948, the NHS of England – actually of England and Wales until 1999 – has undergone three key developments in regulation: (1) the management revolution of the 1980s, (2) the introduction of the internal market and competition during the 1990s and (3) the reassertion of the state in financing and in the regulation of quality during the 2000s. Yet the Health and Social Care Act of 2012 may again shift the balance towards more competition, private sector involvement and private finance (Timmins 2011), thus potentially inaugurating a fourth key development or just a rollback towards the second one. The cumulative efforts of these policy changes have led to profound changes in the shape and substance of healthcare regulation in England, particularly in redistributing authority by dispensing with the erstwhile hierarchical modes of interaction between the state and local actors in favour of more horizontal ties that foster competi-tion amongst service providers.

When the NHS was founded in 1948, it built on pre-existing structures, most saliently the division between teaching and non-teaching hospitals, each of which had a distinct line of command. Against the background of general enthusiasm for planning, the NHS Act of 1973 – passed by the


Conservative Party – established a unified structure for the inpatient sector based on consensus management. However, this system of management only exacerbated the problems of efficiency and accountability that had already plagued the NHS. Accordingly, when the Conservative government returned to power in 1979 with Margaret Thatcher as prime minister, one of its key aims was to address these issues by adopting a general management approach that originated in the business sector. The adoption of this new regulatory style at the hospital management level in the Griffiths reform of 1984 was a significant ideological shift in public policy: The so-called New Public Management (NPM), which placed special emphasis on market solutions to public policy challenges, had come to dominate many national policy cir-cuits at the time. Given the neoliberal leanings of the Conservative Party, the NPM was embraced vigorously.

But what made healthcare policy particularly amenable to this managerial revolution? The NHS reforms of the 1980s were very much a consequence of the Conservative Party’s need to rectify the immense costs of reorganization that had been brought on by the party’s NHS Act of 1973. Amongst other things, the act led to the creation of a bounty of costly administrative and clerical positions (Ham 2009). It also had a negative impact on staff morale and met with increasing political opposition in the mid-1970s (Brown 1979; Haywood and Alaszewski 1980). These costs accumulated in an economic environment of stagnation that forced policy makers ever more strongly to seek novel policy solutions. The timing of the adoption of the NPM in the early 1980s can therefore be explained by a particular constellation of factors: Significant problem pressure coincided with a dominant, interna-tionally diffused policy paradigm that was strongly advanced by a political party with like-minded ideas.

However, just as in earlier years, reorganization and the introduction of the NPM during the 1980s produced its own burden of costs. Many of the challenges facing the NHS were identified in the 1989 government White Paper entitled ‘Working for Patients’. The paper addressed a series of deficits characteristic for state failure in NHS types of systems: inefficiencies, lack of responsiveness to patients, long waiting lists as well as bed shortages and staffing insufficiencies that had worsened due to the NHS funding crisis of the 1980s (Ham 2009). Inefficiency and resource wastage were related to the lack of cost responsibility of providers, which under fixed budgets generally entails undertreatment and waiting times (Barr et al. 1989). In addition, seri-ous doubts existed as to whether the process of service provision itself was efficient.

Once again, the Conservative Party was compelled to reform the NHS and did so dramatically with the NHS and Community Care Act of 1990. The 1990 act introduced, for the first time in NHS history, an internal market for the buying and selling of healthcare services that relied on a novel mode of coordination – competition. One of the basic premises of this reform was


the notion that greater efficiency could be achieved when ‘money follows patients’ (Neri 2009). By introducing the internal market, the NHS was to address a perennial deficit in which finances had been distributed without regard to performance. Competition was therefore a means of controlling provider behaviour (LeGrand et al. 1998).

In many ways, the internal market was a natural, albeit radical successor of NPM insofar as both established public policy solutions rooted in market principles, particularly addressing questions of efficiency. What we there-fore find at this critical policy juncture is the coming together of systemic deficiencies and costs associated with previous reforms with an ideological maturation of the Conservative Party that further advanced the role of the market in society. The latter coincided with an encompassing, international policy zeitgeist that diffused the concept of ‘managed competition’ as put forth by the economist Alain C. Enthoven (1988).

As the Conservative Party gave way to New Labour’s tenure in office, led by Tony Blair (1997–2009), reforms continued to advance conditions for com-petition and the internal market, though in disguise: Market rhetoric disap-peared from government documents and the internal market experiment was said to be ended (Bradshaw 2003) despite remaining very much intact. Unlike the Conservatives, however, New Labour also sought to address the enduring problem of underfunding in the NHS by injecting significantly more money into the system. In doing so, the government emphasized increasing quality by introducing standard setting and regulatory bodies such as NICE (National Institute for [Health and] Clinical Excellence), Monitor and the Care Quality Commission (Ham 2009). This move towards (more) re-regulation was a fundamental shift in ideology that took place when New Labour took office. Now the state reasserted itself in assuring quality of care, and not only market-driven choice and efficiency as in the Thatcher years.

When a Conservative-led government returned to office under David Cameron in 2010, a revitalized emphasis on market solutions in health-care emerged with the Health and Social Care Act of 2012 (Timmins 2011). Unfolding in an environment of intense fiscal strain, the act significantly reshuffles NHS structures by introducing new purchasing organizations dominated by general practitioners (clinical commissioning groups), and by involving private and voluntary providers more broadly. On the provider side, all hospital and community services were to become Foundation Trusts, which were now allowed to generate up to 49 per cent of their income from private patients. The 2012 act also aimed to insulate the NHS against politi-cal processes by minimizing the role of the Department of Health, particu-larly at the regional level. Moreover, targets and top-down performance management were to be replaced in favour of outcome indicators (Hunter 2013; Klein 2013).

Although the gravity of these changes still remains to be seen as implementation unfolds, the reform is an ideological move away from New


Labour’s interest in re-regulation, a move towards greater competition and a more prominent role for the private sector, a direction of reforms that had been fundamental for Conservative Party policy since the introduction of the management revolution in the 1980s.

The English NHS is a healthcare system that has undergone extensive reg-ulatory changes in order to address deficiencies of the system and the costs derived from ongoing structural reforms. These sources of pressure have driven policy makers to adopt new solutions to ongoing problems. However, the content and timing of these solutions have largely been determined by party politics, which emphasizes the role of agency but also that of political ideology and the international diffusion of ideas in explaining healthcare system change.

Interestingly, however, once introduced, competition continued to be advanced as a coordination mechanism despite an ideological shift to New Labour and its interest in reasserting the leading role of the state in health-care. This suggests that the developments in regulation over the past dec-ades in England have become sufficiently institutionalized to speak of a path dependency of market principles embedded in a larger, state-led healthcare system. However, the extent to which such non-systemic principles will con-tinue to be expressed – and be expressed openly – is likely to depend upon the party in office.

Italy

In 1978, Italy replaced a virtually bankrupt, highly fragmented and unpopu-lar social insurance system with an NHS (Vicarelli 1997; Fargion 2006; Neri 2009). By virtue of its centralized and universalist nature, the NHS model represented a viable solution to the problems of the Italian healthcare sys-tem with selective coverage and unruly spending. However, the setting of budgets in the Italian context proved to be inefficient as regions were not held accountable for overspending. Where regions exceeded their funding limits, the central government would cover the deficit, thereby creating negative incentives for regions and providers. As such, Italian NHS spending quickly escalated during the 1980s, soon making a second round of reforms necessary (Frisina and Götze 2011).

Our discussion of changes in Italian healthcare regulation focuses on the first major reforms that took place during the early 1990s. They were largely targeted at meeting challenges brought on by the problem of controlling regional healthcare expenditure, a rather atypical feature of an NHS system. It is important to note, however, that public healthcare expenditure in Italy, viewed comparatively, has historically been lower than that of the EU aver-age (Frisina and Götze 2011). Therefore, despite regions exceeding their budgets, the Italian NHS can still be said to suffer from the systemic deficit of underfunding. Moreover, as regional spending reflects the efforts of not only regional governments and their control over finances but also that of


local hospitals and doctors, it is also very much related to the challenge of controlling provider behaviour – a common form of state failure typical for NHS systems.

The central government’s responses to these challenges have been manifold. However, we wish to highlight three of the main developments affecting regulation: (1) the decentralization of healthcare financing, which is very much rooted in the political–institutional fabric of the Italian case but also akin to the restructuring efforts of the English NHS, (2) the introduction of NPM principles and the internal market (the latter short-lived) and (3) the reassertion of the state in standard setting (however, unlike the English case, coupled with a withdrawal of state financing).

As the 1980s were marked by gross fiscal irresponsibility by the regions (France 1994), two laws were passed under the centre-left Giuliano Amato and Carlo A. Ciampi cabinets in 1992 and 1993 (Legislative Decrees 502 and 517) that gave regions greater responsibility in covering deficit spending for any costs not associated with centralized standards for care.

The laws rested on the notion that by allocating financial responsibility for healthcare at an intermediary level, the healthcare needs of regional populations would be better served, as regions – not the central government – would have a clearer understanding of the strengths and weaknesses of their local system of services and could better sustain economies of scale. This logic mimicked the ‘money follows patients’ approach of the English NHS in the Community Care Act of 1990; however, it also reflected the contentious centre-periphery politics of the Italian state, which were particularly salient at the time (Frisina and Götze 2011). Decentralization also aimed to make regions and thus locally regulated providers more accountable for their spend-ing behaviour, thereby addressing a key deficit in the Italian healthcare system while also strategically shifting responsibility on fiscal matters away from the central government. Accordingly, the passing of the 1992/1993 laws was very much rooted in the functional necessity for change combined with political opportunism.

Beyond setting in motion a still ongoing process of decentralization, the 1992/1993 laws also introduced the opportunity for a radically new model of governance to emerge in Italian healthcare: Regions were granted greater authority to organize and administer healthcare services locally and were encouraged to do so on a competitive basis, using the principles of NPM and the internal market, as seen in the English NHS (Petretto et al. 2003; Neri 2008, 2009). In line with an already internationally diffused policy paradigm that especially favoured NPM, it was argued that by liberalizing healthcare services the modernization of the Italian state could also be achieved (Taroni 2011).

In contrast with England, however, where this paradigm could be imple-mented uniformly, in Italy the liberty of deciding how and in what manner they would adopt new forms of regulation was given to regions, which have a high degree of political autonomy, and significant inter-regional differences


emerged (Neri 2008, 2009). Consequently, the liberalization of the Italian healthcare system remained highly fragmented and in many cases short-lived. It has been described elsewhere as being only ‘superficially analogous’ to developments in England (paraphrasing Taroni 2011, 287). Liberalization and the internal market did, however, have a significant impact on service providers in Italy, as they led to a greater influx of private providers in many regions, and to a significant redefinition of remuneration and accreditation practices (Neri 2009).

However limited or varied, the new emphasis on competition and market principles represented a significant break in regulatory style in the Italian NHS. It is important to note, though, that unlike the English case, where party ideology played a strong role in such developments, the electoral system of the First Italian Republic (ending in 1993), which relied on propor-tional representation, led to a centre-left leaning government in those years, but in a highly fragmented and tenuous political landscape. Accordingly, we cannot observe a strong role for uniform or dominant party ideas in contributing to Italian liberalization trends. Interestingly, the first proposals for such changes can be traced back to as early as 1984; however, it was not until the early 1990s – when similar developments across Europe were tak-ing place and when public dissatisfaction with the healthcare system in Italy had reached an 88 per cent level – that reform would be realized (Mossialos 1997; Neri 2009). Accordingly, rather than political ideology, it was the confluence of systemic deficits, public pressure and an international policy zeitgeist that significantly contributed to, if not determined, the timing of the Italian reforms.

Whereas liberalization of the Italian healthcare system remained mod-est, the process of decentralizing healthcare financing that the 1992/1993 laws set in motion could not be contained. This was due, in part, to the ongoing financial irresponsibility of southern regions, a problem that came under special scrutiny as Italy approached the prospects of having to meet the qualification criteria for the European Monetary Union in the late 1990s (France 2009). Moreover, as discussed elsewhere at length (Fargion 2006), the separatist agenda of the Lega Nord party created a source of great politi-cal pressure; regional empowerment in many areas of social policy, including healthcare, was granted by the central government as a means of quelling political unrest. Decentralization therefore served as a kind of political pana-cea and, with the passing of Legislative Decree 446 in 1997 and 56 in 2000, the total regionalization of financing was achieved.

As the Italian NHS entered the new millennium, particularly under the neoliberal conservative leadership of Berlusconi, decentralization became increasingly coupled with more emphasis on privatization and regional oversight as a result of a constitutional amendment in March 2001 (Title V). Amongst other changes, the amendment placed greater pressure on regions to assure their populations’ coverage in line with positive and negative lists


of services defined by the central government. By most accounts, changes introduced in 2001 represented an important first step by the central gov-ernment to counter the centrifugal forces of healthcare decentralization and political devolution (France 2009). In cross-national perspective, increased oversight by the central government mimics developments in re-regulation seen in the English NHS at the time – despite the ideological differences between New Labour and Berlusconi’s (then) Forza Italia. This suggests the potential role of systemic deficits of the NHS type, particularly the control of provider behaviour, in driving the use of centralized standard setting in both cases.

A far more closely related ideological move on the part of Berlusconi, but also of the more recent Monti government (2011–2013), has been cuts to the NHS budget together with substantial increases in out-of-pocket spend-ing for patients. Under Berlusconi in 2011, copayments for outpatient care (€10) and for non-necessary first aid admissions (€25) were reintroduced. Meanwhile, austerity measures under Monti have led to further cuts in the NHS budget, alongside an obligation by doctors to prescribe generic medica-tions and to reduce expenses related to personnel and to the procurement of goods, services and medical devices (Paterlini 2013). Recent developments therefore stand to exacerbate the systemic deficit of underfunding, already acute in the Italian case.

Italy’s healthcare system has undergone significant transformation through decentralization and some elements of liberalization. These changes in regulation are direct responses both to the systemic deficiencies typical of an NHS system (insufficient incentives for providers and underfunding) and to the particular failings of the Italian healthcare system (overspending by regions). Functional understandings of change therefore do not provide a full explanation for what is seen in this case. Moreover, as regards the timing of major reforms, our findings point to the significance of policy ideas (inde-pendent of political ideology), public dissatisfaction and political opportunism in ushering in change. The Italian case therefore reflects a kind of subspecies of an NHS system that emerges as a result of strong intervening factors that are embedded in the larger political economy, especially through political devolution.

Social health insurance systems

SHI systems cover the vast majority of the population by mandatory sickness funds financed through wage-related contributions. Hospitals are mainly public or private non-profit providers, whereas for-profit providers dominate the other sectors. The interaction between funds and providers is characterized by collective contracts between their umbrella associations, a situation commonly labelled ‘corporatist self-administration’. Volume-based, open-ended remuneration allows high responsiveness and productivity of


physicians, but as services may also include various duplicated or unnec-essary treatments, and patients may demand state-of-the-art treatment including new technologies, SHI systems are beset by poor cost contain-ment prospects. This phenomenon is rooted in the rent-seeking behaviour of corporatist actors that operate in a framework granting veto power to the major actors. Here, as our two SHI cases will show, problem pressure should translate into efforts to tackle this institutional sclerosis and – compared to an NHS – high expenditures.

Germany

Since the first oil crisis, the German healthcare system has been marked by two general reform trends: a rather reactive cost containment policy from 1977 to 1992 and, subsequently, structural reforms to control costs and enhance efficiency. While the former strategy mainly remained within the regulatory framework of the SHI system, the latter has affected its core principles.

Starting with cost containment policy, we observe that service providers were in a position to extend their revenues considerably in the early 1970s. On the one hand, corporatist self-administration forced sickness funds to reach consensus with physicians; on the other hand, the first centre-left government in the history of the German Federal Republic supported the expansion of healthcare (Lindner 2007). The first oil price shock put an end to this, however. The opposition successfully framed increases in public health expenditure as a ‘cost explosion’ (Braun et al. 1998). As the unem-ployment rate skyrocketed from full employment in 1971 to nearly five per cent in 1975, a majority of Social Democrats also perceived growing con-tribution rates as a threat to the export-oriented German economy and, hence, to full employment. Therefore we identify a shift in ideas towards austerity policy, manifested in the Cost Containment Act of 1977. This law became the baseline for health policy-making in various cabinets up until the early 1990s. In order to keep contribution rates low, the government shifted financial responsibility towards the patient by increasing copay-ments and delisting services from the benefit package (Rothgang et al. 2010, Chapter 6).

As the reforms did not change the incentives for sickness funds or pro-viders, they had short-term effect only. The powerful medical profession, with political support from the Free Democrats, successfully opposed any attempts to increase state influence or market competition (Rosewitz and Webber 1990, Chapter 6). Patients, by contrast, were neither organized nor did they have huge influence on the boards of the sickness funds formed by employer and union representatives (Lindner 2007). Therefore, while a functional argument explains the shift towards cost containment, it was the influence of corporatist actors supported by coalition governments that indi-cated who would become the main target of this strategy.


In 1992, the Christian Democrats who led the government and the oppos-ing Social Democrats who in turn had a majority in the Federal Council, the Bundesrat, allied to break the stronghold of physicians and Free Democrats (Hacker 2004; Altenstetter and Busse 2005). This ‘informal Grand Coalition’ blamed poor cost containment on corporatist self-administration and, with the Health Structure Act, implemented state-defined sectoral budgets. This put an end to open-ended remuneration. Moreover, the law introduced the free choice of sickness funds.

This path-breaking measure was meant to increase competition, as favoured by Christian Democrats, and equity between white-collar and blue-collar workers, as supported by the left. Both parties shared the NPM idea that in order to increase efficiency, sickness funds should become players within the healthcare system, instead of merely acting as payers of health-care (van Essen and Pennings 2009; Gerlinger 2010). But as the funds had no leverage to reduce treatment costs and the risk equalization scheme worked poorly, a risk selection process was quickly pursued. In particular, company-related funds gained market shares as they had a more profitable risk struc-ture. Within a few years, their membership nearly doubled. As those who switched had on average an advantageous health status, the risk structure of company funds was improved, which allowed a further reduction of their contribution rates (Götze et al. 2009).

For other sickness funds, by contrast, the situation worsened due to the over-representation of chronically ill persons among their insured. In order to halt this process of increasing risk segregation, the centre-left coalition introduced a common risk pool for exceptionally expensive patients in 2002 and modestly refined the risk equalization scheme in the following year so as to diminish incentives for active risk selection. Moreover, it introduced initial opportunities for selective provider contracts to foster competition (Greß et al. 2006). Although the contribution rates temporarily converged, it was still possible to identify profitable insurees. Active selection on the part of the funds started again, while instruments for organizing effective and efficient care remained largely untouched (Götze et al. 2009).

In order to eliminate all remaining incentives for risk selection, the Grand Coalition of Christian and Social Democrats, after several years of discussion, implemented a new risk equalization scheme based on morbidity that came into force in 2009. This was part of a larger reform package, the Statutory Health Insurance Competition Strengthening Act, which also introduced a central fund distributing the money among individual sickness funds. The uniform contribution rate is now set by the state, but sickness funds are allowed to charge additional premiums where needed, or alternatively to refund contributions to their members if they have a surplus.1 The reform also improved opportunities for selective contracts in the outpatient sector by allowing well-negotiated provider contracts to be reflected in the funds’ respective contribution rates (Gerlinger 2010). Here competition between


sickness funds for members spilled over into the interaction between funds and providers (Götze et al. 2009).

To sum up, the timing and content of the path-breaking Health Structure Act is largely attributable to fragmented power in a federal system, leading to an informal coalition of Christian and Social Democrats. The subsequent reforms may be explained in functional terms, namely, the necessity to cre-ate conditions under which competition might work and the shared belief in NPM ideas of both catch-all parties.

The Netherlands

The Dutch SHI system is split into two compartments: The first comprises the universal Exceptional Medical Expenses Act, which covers long-term treatments such as hospitalizations for more than a year and long-term care. The second – more important – compartment for curative care was two-tiered until 2006, with around two-thirds of the population belonging to a public scheme and the (mainly well-off) remainder being privately insured. The transformation of the Dutch healthcare system since the 1970s has been largely characterized by two partly overlapping trends, namely, hierarchical cost containment from 1982 to 2000 and, since the late 1980s, an ongoing pro-competition reform process. The latter culminated in 2006 when the Netherlands put an end to its two-tiered system by introducing a unitary basic benefit market for the entire population, while the division between the two compartments mentioned above prevailed.

Beginning with cost containment policy, it is important to note that the Netherlands, as a nation that exports natural gas and therefore as a beneficiary of the oil crisis, managed the economic turbulences of the 1970s smoothly. In the early 1980s, this fortune turned to fate in the onset of what is often referred to as the ‘Dutch disease’ (see Krugman 1987). The manufacturing sector lost its competitiveness and the unemployment rate doubled between 1979 and 1983, resulting in higher contribution rates for the remaining workforce. The Wassenaar Accord of 1982 sought to break this vicious circle. Trade unions and employers’ associations agreed on wage restraints, supported by attempts of the centre-right government to lower contribution rates (Visser and Hemerijck 1997).

Hence the reduction of skyrocketing healthcare costs was a crucial component of Dutch austerity policy. Since the government lost confidence in the capacity of corporatist self-regulation to curb costs, it introduced two measures of hierarchical price control in 1982–1983: the central healthcare tariff authority and hospital budgets. Now, collective contracts between umbrella organizations of insurers and physicians needed approval by the tariff authority before they became effective. Although corporatist bargain-ing took place in the ‘shadow of hierarchy’, medical specialists resisted state influence. Hospitals were affected to a much greater extent. State-defined budgets meant a radical departure from open-ended cost reimbursement and


cut the traditional link between service volume and revenues (Schut 1995). Hence both sectors suffered from a systemic lack of cost control, which accounts for the direction of change, namely, increasing state hierarchy. The different degrees of state intervention in ambulatory and hospital care, respectively, can be attributed to the power of organized physicians.

Although supply control successfully contained costs, political actors still perceived a poor allocation of resources due to misleading incentives between in- and outpatient care, that is, inefficient care provision. In 1986, moreover, at odds with increasing state regulation, the centre-right cabinet commis-sioned a group of experts to develop a blueprint for a new demand-driven healthcare system. The so-called Dekker report criticized the fragmented financing system as the various financing bodies were more interested in shifting health expenditures than in using them efficiently (Commissie Dekker 1987, 48). Therefore the experts recommended merging social and private insurance as well as the Exceptional Medical Expenses Act in a uni-tary basic benefit market. The state was to be responsible for guaranteeing a level playing field through the introduction of an adequate risk equalization scheme (Schut 1995).

Although all relevant parties supported these NPM ideas (van Essen and Pennings 2009), it took 20 years to implement a unitary basic benefit market for curative care (the second compartment, while the Exceptional Medical Expenses Act remained separate). The reasons for this lay in an institutional setting favouring multi-party governments and in the negative effect that the integration of social and private insurance would have on the incomes of some of these parties’ supporters in the main electorate. When the centre-left coalition came into office in 1989, deputy minister Simons extended the scope of the drafted public benefit package and income-related contri-butions. This sparked harsh criticism from employers’ associations, private insurers, physicians and, finally, even from the Christian Democratic coali-tion partner (Okma 1997, 143). The reform process came to a halt just after the introduction of the initial step, which included free choice of sickness funds and limited opportunities for selective contracting in 1992.

Accordingly, the next so-called purple coalition refrained from further structural reforms of health insurance in order to reconcile the contradict-ing ideas of its ‘red’ Social Democrats and ‘blue’ Conservative Liberals. There was far more consent to be had with regard to cost containment. The purple coalition limited the number of corporatist boards and included medical specialists in the hospital budgets (Okma 1997, 98; Helderman et al. 2005). Hence, in the late 1990s, the state had a superior position in the planning and pricing of all medical services, and this allowed effective expenditure control.

However, the flipside of this NHS-style budgeting practice was a perceived lack of efficiency and equity that surfaced in long waiting lists and bypass strat-egies (Maarse 2002). Moreover, the need for strict cost containment was no


longer commonly accepted. While the ‘Dutch disease’ of the early 1980s justified tight budgets, the ‘Dutch miracle’ in the late 1990s challenged their acceptance (Schut and van de Ven 2005). In 2000, the purple coalition lifted hospital budgets, marking the end of strict cost containment. However, the government decided not to return to retrospective cost reimbursement. Instead, a prospective case mix-based system was adopted to ensure the effi-cient allocation of resources for hospitals and medical specialists (Schmid and Götze 2009). This move reflected a bigger roadmap for health reform, with demand-driven market competition incrementally substituting hierar-chical supply control, in line with the Dekker/Simons plan (Helderman et al. 2005). Regulated competition was seen as crucial for attaining cost contain-ment and cost efficiency at the same time.

The following centre-right cabinet continued the revised reform proposal but changed two features on ideological grounds. First, the new health insurance system was to be equally funded by income-related and community-rated contributions. Second, the new system was to run under private law and allow for-profit insurers. Both revisions created major hurdles for a compromise with Social Democrats and trade unions as they feared negative effects for low- and middle-income families, as well as non-compliance with European competition law. The former was solved with tax subsidies for low-income households and the latter by obtaining a pre-approval from the European Commission (Bassant 2007).

To summarize the Dutch case, systemic deficits of this type of health policy – a fragmented financing system and poor integration of service providers – together with a shift of ideas towards regulated competition explain the direction in which the reform process developed. Concerning speed and timing, the highly fragmented political system and the position of relevant actors such as parties, insurers and physicians played a crucial role.

Private health insurance systems

The ideal-type PHI system is characterized by rather weakly regulated health-care markets, where patients, providers and health insurance companies enter into free contractual relationships. Healthcare services are typically delivered by profit-seeking hospitals and health professionals remunerated on a fee-for-service basis. As the dominant mode of coordination, competition enhances the responsiveness of the healthcare system to consumer demand, provider productivity and innovation.

The private insurance model mainly suffers from the failure to cover large parts of society and the lack of cost control. In order to avoid adverse selec-tion, insurance companies pursue risk-rating for defining their premiums. However, high-risk groups may face prohibitive premiums and the poor may not be able to meet risk-equivalent rates. Consequently, considerable parts of the population – often those most in need – will remain without insurance


or will have to accept limited coverage. At the same time, the private insur-ance system is prone to high expenditures, mainly fed by administrative costs ballooning in the risk-rating process and by overutilization due to lack of control over provider behaviour.

The United States

With the introduction of the Social Security Act of 1965, the state – that is, the federal government – entered the US healthcare system as an important actor by financing Medicare and Medicaid. These programmes cover groups that are barely able to pay risk-equivalent premiums because of high health risks (mainly concerning the aged covered by Medicare) or low income (Medicaid), augmented by the Children’s Health Insurance Program (CHIP) in 1997. With the Patient Protection and Affordable Care Act of 2010 (ACA), a further incisive reform was undertaken by the federal government, this time particularly stressing its role as a regulator.

The growth of hierarchical government regulation was not the only change in the regulatory structure of the US healthcare system, however. Between 1965 and 2010, when only incremental steps were possible in government regulation, hierarchical elements evolved forcefully in the private sector. As Health Maintenance Organizations (HMOs) and other forms of managed care grew, they gained control over the consumption and delivery of services by vertically and ‘virtually’ integrating the function of financing and service provision (Rothgang et al. 2010, Chapter 7). Therefore hierarchization within and outside the state characterizes the main regulatory changes in the US healthcare system. But why and how did these changes come about?

Throughout its history, the US healthcare system experienced immense problem pressure due to the ever-increasing costs of medical care. As a text-book example of a private healthcare system until the 1960s, the United States lacked the instruments to steer actors and processes in the produc-tion and consumption of healthcare. Voluntary PHI spread after mandated wage stops in the Second World War made it attractive as a ‘fringe benefit’. Coverage decisions, therefore, were strongly contingent upon employers’ readiness and capacity to offer insurance to employees. For a long time, cost reimbursement and private fee-for-service principles allowed providers to define the fees they demanded. Moreover, benefit packages were incomplete as, for example, dental care, vision care and some pharmaceuticals were not regularly included, leaving the consumption of healthcare to a considerable degree to the patient’s willingness and ability to pay. As premiums grew in line with prices, coverage became unaffordable, particularly for low-income earners and people with high health risks. Since high-risk individuals are more likely to demand health insurance (adverse selection) while insurers select low-risk customers (cream-skimming), the private insurance market was neither able to cover the entire population nor to provide comprehen-sive benefit packages.


In healthcare regulation, considering relevant ideas, public support was rather given to market competition, with the government serving as the last resort ‘should anything go wrong’ (Shapiro and Young 1989, 79). Accordingly, Medicare and Medicaid became possible only after the elderly and poor had been shown to have difficulties in finding affordable coverage in private markets (Marmor and McKissick 2000). Although the problem of insuring these two groups had emerged much earlier, it was particularly after the 1940s – when private employment-linked insurance spread across the United States – that the dilemma of the ‘left outs’ became ever more salient (Richmond and Fein 2005). By the 1960s, significant pressure had built up and found a receptive audience in the incumbent Democratic administration of President Lyndon B. Johnson, which placed a strong emphasis on social policy reform as part of the Great Society programme. However, attention to the ‘left outs’ meant considerably narrowing the scope of health reform to the most needy population groups (Marmor 2000; Oberlander 2010).

In contrast to earlier approaches to health insurance, the Social Security Act of 1965 was fully backed by labour unions and supported by the American Hospital Association (Quadagno and Street 2005). Thus it was a combination of public pressure, political support by Democrats for the needy (and deserv-ing), as well as the intention to preserve and assure the private insurance market, that made the enactment of public programmes possible (Cacace 2010a, 2010b). Another prerequisite for the reform was the promise not to interfere with the autonomy of providers, particularly regarding remunera-tion. Effective provider regulation within the public programmes did not set in before 1983 when Diagnosis Related Groups (DRGs) were introduced.

Although several attempts were made to introduce national health insurance in the following decades, only small reform steps were possible. Opponents of government intervention – most notably amongst Republicans, but also a small number of Southern Democrats and the leadership of the American Medical Association – continuously scared the public with the prospect of ‘socialized medicine’ (Starr 1982; Hacker 2010). At the same time, the politi-cal system of checks and balances, the size and diversity of the nation and the lack of strongly programme-oriented political parties have supported the fragmentation of political power, thereby impeding pro-governmental reforms (Steinmo and Watts 1995, 362). The Obama administration, how-ever, learned from the failures of past efforts, notably the failed Clinton reform: Understanding the fragmented landscape of the American political and healthcare system meant that one would have to devise a reform that largely built on these pre-existing arrangements.

President Obama’s political pragmatism, which accommodated and courted rather than alienated major private sector stakeholders (for instance, the pharmaceutical industry), contributed to the successful passing of the ACA in Congress (Hacker 2010; Oberlander 2010). However, political manoeuvring of the Executive alone did not suffice, as the ACA’s legitimacy


was further contested in a legal battle at the US Supreme Court in 2012. Ultimately, the Court decided – with the conservative Chief Justice casting the decisive vote – in favour of upholding key parts of the law.

However, the implementation has proven far more complex than expected. To date, the reform’s endeavour to create a national long-term insurance plan (Title VIII) has been suspended; many states have resisted or delayed creating their own health insurance marketplaces, the so-called exchanges, while still others – particularly Republican-led states – have rejected calls for Medicaid expansion, despite overwhelming support by private sector actors in those states and despite financial inducements by the federal government (Katz Olson 2010; Kaiser Family Foundation 2013). Accordingly, the sustained suc-cess of the ACA remains in question as the reform comes to terms with the highly fragmented and polarized political landscape of the United States.

An element largely neglected in the analysis of regulation in the American healthcare system is the emergence of hierarchical regulation by private actors, which developed in the time between the passing of the two major reforms acts of 1965 and 2012. These arrangements developed as the federal government had left service provision in private insurance largely unregulated. Driven by self-interest, the private sector recognized the benefits of building up functional equivalents to state hierarchy, which finally also spilled over into the public programmes. Starting with the spread of HMOs, the vertical integration of financing and service provision prolifer-ated, exerting hierarchical control over providers and patients via gatekeep-ing requirements and utilization reviews. As the benefits from hierarchical regulation translated directly into lower insurance premiums, managed care further gained in market share. Another factor explaining the timing of private hierarchization is that private insurers gained market power by con-centration in the late 1980s and therefore were able to dictate the rules to providers (Rothgang et al. 2010, Chapter 7). However, the restrictiveness of HMOs led to a consumer backlash and ultimately gave way to the creation of more loosely structured models of managed care, such as Preferred Provider Organizations. As a consequence of the managed care backlash, providers could restore parts of their autonomy.

Today, ‘virtual’ integration dominates the relationship between insurers and providers, and selective contracting leaves some leeway for negotiation between the two. As more beneficiaries of the public programmes (have to) join managed care plans, private hierarchy will increasingly accompany and modify government regulation. Consequently, the United States has wit-nessed a series of public and private hierarchical interventions to cope with its systemic deficits. However, the timing and content of these reforms high-light the role that especially private sector actors and interests have played in defining responses to these deficits. This includes the development of private hierarchy in the absence of government intervention and the development of hierarchy in government programmes that builds on and looks out for


political compromises with private stakeholders in a veto-ridden political system that has become increasingly polarized in recent decades.

The five cases compared

This chapter explained the changes in healthcare regulation in different types of healthcare systems, and in particular why certain changes happened at all, why they happened when they happened and why they happened to the degree they happened. In this section, we turn to explaining similarities and dissimilarities between the developments in different healthcare system.

As the case studies illustrate, the same basic problem is at the root of all reforms: a conflict between increased demands on healthcare due to medical technological progress and ageing populations and the limited ability and willingness to increase health expenditure, thus creating pressure to increase efficiency. The common problem, however, surfaces in different ways in the various types of healthcare systems, which is the major reason for the diver-sity of reform paths chosen.

In England, cost containment has not been a major problem, as centrally fixed budgets guaranteed cost control. Rather, quantity of care was at stake, as tight budgets were transformed into a decreasing number of hospital beds, leading to growing waiting lists and more waiting time. Health professionals tended to treat their patients with all the time they deemed necessary and blamed the government for the resulting queues. Thus it was considered necessary to make budgets dependent on service provision. The ‘money fol-lows patients’ doctrine created the purchaser–provider split, internal markets and the formal privatization of hospitals, which became independent trusts. Consequently, a new form of hospital remuneration – through Healthcare Resource Groups (HRG) – became necessary. Also, the attempts to introduce quality indicators are an effect of the new path chosen with the 1991 reform. The speed of reform and its rhetoric, though, heavily depended on the party-political composition of the government of the day.

In Italy, local and regional actors found another way of obtaining relief from the problem pressure: overspending at the expense of the national gov-ernment. Thus our hypothesis on the effect of problem pressure on NHS systems must be refined: While nationwide NHS systems are able to control costs but result in waiting lists, this might be different in a quasi-federal sys-tem, where regions play another game with and against the national govern-ment. Italy reacted similar to England, sometimes even imitating the English NHS by introducing NPM, internal markets and competition. This strategy was overshadowed, however, by antagonism between the regions and the central government. This line of conflict was strong enough to over-ride party politics, while the solutions proposed heavily depended on the zeit-geist, that is, on the prevailing ideas of the day in international health and general state reform debates.


In Germany, the characteristics of SHI have ensured a more generous pro-vision of necessary services, which has precluded open rationing through waiting lists. However, cost containment became the major goal of health policy, leading to privatization of health expenditures as soon as the long post-war era of an ever-growing economy came to an end in the second half of the 1970s. In the long run there is the danger that a decline in the share of public financing might delegitimate the SHI system as such, and there-fore strategies were sought to remedy institutional sclerosis and stimulate innovation. Influenced by the neoliberal doctrine of the 1980s and by cor-responding suggestions for the reform of healthcare systems, competition was introduced as a new means of coordination. Once again the pertinent reform, the Health Structure Act of 1992, must be regarded as the critical juncture, setting a new path over the next two decades for the reform of the healthcare system, including some re-regulation and centralization, particu-larly in the Statutory Health Insurance Competition Strengthening Act of 2007 (Gerlinger 2010).

The story was similar in the Netherlands, the other country with a social insurance scheme in our sample. Problem pressure also surfaced in demands for cost control. The Netherlands implemented strict budgets in the hospi-tal sector, which led to NHS-style problems such as waiting lists for surger-ies. Therefore a structural reform introduced a ‘demand-driven system’ and, moreover, sought to overcome the fragmented financing system including redistributive effects for the main voter groups of political parties. Hence, like Germany, and in many respects like its precursor, the Dutch system saw the introduction of competition among funds, a risk equalization scheme and selective contracting. The speed of structural reform, however, depended very much on the composition of the respective governments. In fact, it took two decades until the major ideas of the Dekker plan of 1986 could be introduced.

While problem pressure typically leads to an insufficient provision of services in NHS systems, it causes rising costs and expenditures in SHI systems. In PHI systems – and that we learn from the experience of the United States – costs tend to explode, while at the same time service pro-vision remains beyond reach for large parts of the population. The one major theme of healthcare reform in the United States has therefore been to expand coverage to ever larger parts of the population. Steps in this direction were the introduction of Medicaid, Medicare, CHIP and ‘Obama Care’. The other major theme has been the cost explosion due mainly to the lack of care management in a system where insurers only paid the bills which patients handed in. While the expansion of public programmes led to increased hierarchical control via public schemes, the managed care revolution of the 1980s introduced vertical integration of financing and service delivery in HMOs and other managed care organizations. Managed care may thus be regarded as a functional equivalent of the kind of state regulation that SHI and NHS systems provide.


So, while the type of healthcare system is the single most important variable in explaining the direction of change in our country sample, the timing and dynamics of reforms differ even between countries of the same system type. One reason for this is the perceived severity of problem pressure. The oil price crises, for example, instantly affected Germany more than the Netherlands, which exported gas at the time and thus profited from rising energy prices. Initially, this reduced pressure in the Netherlands for cost containment in healthcare, but in the long run the advantage turned into a disadvantage as it led to an upward revaluation of the Dutch currency and to the ‘Dutch disease’ of the early 1980s, which then triggered reforms.

For the SHI systems under consideration, the constellation of actors and the party allegiance of the government of the day have been of major influence. In England, however, changes in government rather led to a new rhetoric while the reform path chosen in 1991 was continued, albeit with different degrees of enthusiasm. The effects of the general makeup of the political system are best exemplified by Italy, where the conflict line between regions and the national government has proven to be very significant. Notwithstanding these differences, in all SHI and NHS countries the influence of the domi-nant ideas of the time, namely NPM and competition, is obvious, while in the United States reforms were clearly triggered by skyrocketing problems, often at odds with the ideological leaning of a large part of the public and of many politicians.

Conclusion

As the five cases discussed here illustrate, a hybridization of regulatory struc-tures has taken place everywhere, as illustrated by

• the use of competition through internal markets or decentralization in national health systems so that providers would have to face the costs of their decisions;

• the introduction of quasi-markets in SHI systems where sickness funds compete for the insured and selective contracting allows for competition among providers, while at the same time state hierarchy limits corporatist agreements;

• the development of instruments of hierarchical control in private insur-ance markets, accompanied by the introduction or expansion of public schemes for the uninsured.

In line with our ‘modified problem pressure hypothesis’, we explained these developments using functional arguments accompanied by institutional reasoning, a consideration of agency and reference to ruling ideas on how to conceptualize the problems of the day. Going beyond our functionalist argument, which establishes systemic deficits by the type of system that gen-erates problem pressure and thus drives the need for change, our findings


point to the role of ideas and their diffusion across policy and national con-texts (for instance, NPM), as well as to the role of political agency, either of political parties or of key stakeholders in health policy (particularly doctors), to (at least partly) explain the timing and content of change. In veto-ridden systems – in our sample Germany, the Netherlands and the United States – the reform process might be drawn out, and reforms affecting providers of healthcare services are much harder to implement than is cost containment at the expense of users.

Thus we relied on all branches of theory that might explain transforma-tions of the state (see Chapter 1 of this volume). We also see an important role for exogenous factors such as economic shocks. A proper understanding of change – which accounts for its direction and timing – therefore requires a holistic approach that draws on functionalist and institutional theories, and on theories focusing on the power of ideas. The explanatory model pro-posed provides room for all three kinds of theories and also allows us to weigh these factors differently depending on the development considered, which might even explain the coexistence of distinct reform pathways in one and the same type of healthcare system (Leiber et al. 2014). In applying this model, we may encounter the problem of overdetermination. However, we would argue that such overdetermination is to be preferred to partial or unrealistic accounts of change.

Note

1 The implementation of uniform contribution rates (with additional premiums to be paid or rebates to be had) has proved to be dysfunctional. Since the uniform contribution rate was set at a comparatively high level, and due to favourable eco-nomic conditions only a minority of funds needed to charge additional premiums. However, those funds were all stigmatized and punished heavily with a loss of members. Therefore, all funds concentrated on avoiding such additional premi-ums by merging with stronger funds and accruing reserves, while competition for service improvements headed for a complete stalemate. Current legislation is plan-ning to cut the uniform contribution rate, forcing most sickness funds to charge a top-up contribution rate. Since this top-up will be calculated as a percentage of wages, it is also deemed to be a less aggressive price signal.

Part VIConclusion

249

13The Democratic Nation State – Victim or Master of Transformations?Steffen Schneider and Heinz Rothgang

In what sense and to what extent has the modern state been transformed in recent decades? How may the transformations be explained? And what is the role of the state itself in these processes of change? As we suggested in the introduction, the descriptive and explanatory questions addressed here require a clear point of reference: the TRUDI state in the OECD world of the three post-war decades. We also need a clear definition of genuine transforma-tions of the state as opposed to mere policy change or institutional reforms that leave the basic contours of the TRUDI model unaltered. We define trans-formations as major shifts of authority to new governance arrangements that include private or international actors and entail a new ‘architecture’ (Cerny 1990) for the production of public goods and services in each of the four TRUDI dimensions (Genschel and Zangl 2014, 338). Chapters 2 to 12 aimed to identify and explain shifts of this kind, which erode the state’s sovereign, quasi-monopolistic role in providing such goods and services and hence qualify as ‘third order change’ (Hall 1993).

Using the TRUDI model as a reference point and teasing out its core dimen-sions – the resource dimension of the territorial state (T), the law dimension of the rule of law (RU), the legitimacy dimension of the democratic state (D) and the welfare dimension of the intervention state (I) – enable us to bypass the hackneyed debate between proponents of the ‘end of the state’ and ‘nothing new under the sun’ perspectives in the extant literature on the state and its transformations. As the contributions to this volume and a growing body of literature illustrate, the reality of state change in the OECD world is more complex and nuanced than ‘statists’ and ‘post-statists’ would have it. This reality precludes facile generalizations across countries or policy areas.1

The complexity and multidimensionality of state transformations makes their explanation – the objective of our book – a formidable task. As we argue in the introduction, the explanation of state change should build on a heuristic that is open and flexible enough to permit the formulation of finer-grained explanatory models for specific transformations occurring in

250 The State – Victim or Master of Transformations?

the four TRUDI dimensions. Our heuristic of ‘driving forces’ and ‘modifiers’ serves this purpose.

In conclusion, we now review the 11 empirical chapters of our volume. To present the material, we first recapitulate the range of research designs and methods used and then summarize the particular aspects of state change in the resource, law, legitimacy and welfare dimensions that these chapters identified and attempted to explain. Taking a more synthetic perspective, we go on to review the theoretical perspectives and major findings of the indi-vidual chapters using the lens of our explanatory heuristic, that is, of driving forces and modifiers: Which of these variables turn out to matter in explain-ing state transformations, and what is their respective weight? Finally, we offer some broader generalizations and conjectures based on the empirical work presented in this volume.

Research designs and methods of the empirical chapters

The chapters do not simply describe transformations in each of the four TRUDI dimensions. Based on the research questions and the explana-tory heuristic outlined in the introduction, they also try to explain the transformations – or occasionally the surprising lack of change. Why do we observe more, or less, transformative change in some of the four dimensions? Why is political authority sometimes transferred to the international level, sometimes to private actors and occasionally to transnational arrangements? Why is there more, or less, convergence in different fields of state activity? Each of the chapters tackles questions of this kind for a particular set of cases and for one TRUDI dimension or policy area. Here we present an overview of the various research designs and methods used in the chapters to test causal hypotheses or to uncover causal mechanisms.

While our volume focuses on the member states of the OECD,2 the empirical chapters draw on a range of national cases that are representative of the major types of established liberal democracies and advanced (post-)industrial economies (Lijphart 1999; Hall and Soskice 2001). Several chapters, for instance, deal with the United States as a sui generis case in both political and economic terms (Chapters 3, 4, 9 and 12), with major EU member states such as Britain, France and Germany (Chapters 3, 4, 8, 9, 11 and 12), or with some of the small, open-economy countries that have received so much attention in the international political economy literature (Chapters 3, 8, 9, 10 and 12; see also Katzenstein 1985; Obinger et al. 2010). The countries examined, moreover, include non-European cases such as Canada and Japan (Chapter 4), Poland (Chapter 8) and New Zealand (Chapter 10), which are less prominent in the comparative literature but whose national trajectories nevertheless shed additional light on causal factors and mechanisms respon-sible for state transformations.


Some of the chapters go beyond the national level and consider interna-tional organizations and regimes as cases – from the United Nations and its institutions to the GATT/WTO regime, the supranational regime of the EU and more policy-specific regimes such as the ILO and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES; Chapters 5 and 6). Chapter 7 considers four different cases and scenarios of emerging regimes of transnational law – in the IT sector, maritime trade, intra-firm trade and international arbitration.

As is to be expected in empirical studies of state change, the research designs of the chapters also rely on time frames conducive to identifying genuine transformations. In one case (Chapter 2), the period of observation covers more than 150 years: After summarizing the rise of public corporations since the 1850s, the authors explain privatization trends for the 1980–2007 period. In most other chapters, time series data (Chapter 9) or narratives (Chapter 12) covering several years or decades – and usually starting with the critical juncture of the 1970s – underpin the analysis; sometimes the lon-gitudinal component of the research design is more parsimonious and two points in time are considered in order to extrapolate trends, as in Chapter 3 (1990s and 2000s) and Chapter 5 (1970s/1980s and 1990s/2000s).

Finally, the chapters build on various methods of data analysis, ranging from large-N statistical analysis (Chapters 2 and 3) to case study (Chapter 7) and pairwise (Chapters 6 and 11) or small-N comparative research (Chapters 4, 5, 8, 9, 10 and 12). Interestingly enough, many of the contributors opted for qualitative styles of analysis that are geared less towards formally testing causal hypotheses than towards the discovery of relevant causal mechanisms (Chapter 4, for instance, uses an evolutionary economics framework to identify and describe these; see also Elster 1989). Overall, the empirical chapters represent a wide range of cases (states, international organizations and regimes, economic sectors or institutional arenas) and research designs, thus providing a solid basis also for theorizing and generalization.

State change in the OECD world: What kinds of transformations do the chapters identify?

Taken together, the empirical chapters provide ample evidence for the stylized core finding that state authority in the TRUDI state is unravelling, as outlined in the introduction and in previous research such as Leibfried and Zürn (2005) or Hurrelmann et al. (2007). Indeed, in the last decades, the state has been transformed in a non-trivial way, and this change includes authority shifts on the internationalization or privatization axis, or on both axes simultaneously when authority emigrates towards private cum interna-tional arrangements – a process we call transnationalization. Clearly, sover-eignty and the production of goods and services hitherto associated with the TRUDI model are now increasingly fragmented or shared in the governance


arrangements of the post-national constellation. Moreover, we find that distinct national institutional arrangements and policy solutions have often been levelled by convergence, which points to a declining capacity of states to implement their own solutions in providing citizens with public goods and services.

Yet considerable variation across the TRUDI dimensions and related policy areas remains, and hence we observe different national trajectories of state change. Most chapters also suggest that the state still is a key player in the emerging scenario of global – or at least internationalized – governance. To quote Genschel and Zangl (2014, 338), the state has become a ‘manager’ of political authority and governance functions. Thus assuming a zero-sum game between the state and international regimes or private market actors seems inadequate, and – notwithstanding the emergence of new players and new roles for political authority – the state upholds a leading role. This complex situation requires us to draw a nuanced picture of (the loss of) state autonomy and state capacity in recent decades and to examine the resource, law, legitimacy and welfare dimensions of the modern state separately.

The three chapters of Part II probe transformations in the resource dimension of the territorial state. As outlined in our introduction and entailed in Jellinek’s (1966) classic definition of the state, this dimension refers to sovereignty and de facto control over a territory, a population and the resources required to assume the governance functions of the TRUDI state. One key resource and measure of state power is a bureaucratic appara-tus, made up of public agencies and public corporations, that enables state actors not only to make collectively binding decisions, but also to monitor them and to enforce their implementation autonomously and effectively.

Both Chapter 2 (on the privatization of public corporations) and Chapter 3 (on public and private employment and earnings regimes) provide evidence of state transformations on the organizational, that is, the public–private, axis. As privatization implies organizational transformations as well as shifting beliefs about adequate or, in the vein of the NPM literature, efficient means of producing goods and services, it certainly represents a case of third order change in the sense of Hall’s typology. While privatization has been ubiquitous in the OECD world, however, a finer-grained analysis of countries and sectors reveals that we have to qualify the importance of the privatization trend. After all, this particular set of transformations is often embedded in a new regulatory role for state agencies and, hence, part of a new configuration – in which re-regulation and newly founded state agencies that oversee the working of privatized markets are combined – rather than a simple retreat of states from governance functions (Chapter 2). Likewise, and contrary to the expectation that employment regimes might converge towards a New Public Management-inspired reform model, the public/ private sector earnings gap proves remarkably stable (Chapter 3), indicating that some effects of formal privatization do not spill over into the public


sphere. Such findings, which indicate that state authority in the production of public goods and services is not simply withering away, hold for all the countries examined.

The transnational regulation of accounting and financial reporting, which is crucial for the functioning of business and markets, may also be related to the resource dimension of the TRUDI model. As the post-2008 finan-cial market, economic and fiscal crises have shown ex negativo, responsible accounting is decisive for the creation of welfare, and hence nation states have traditionally sought to control it through regulation. Against this back-ground, the emergence of a transnational rule-setting regime, as described in Chapter 4, must be seen as a key element of state change rather than simply a change in policy settings and instruments. The authors show that account-ing regulation converges across countries, while rules are increasingly devised by non-state actors. National regulators still ‘interfere’ but increasingly fail to attain national policy objectives, which points to a loss of state autonomy in that policy area. As the transnational regime has developed alongside per-sisting national regulation, however, the chapter also illustrates that instead of a simple zero-sum shift of authority to transnational actors, more com-plex governance arrangements emerge. Again, we may speak of third order change: A new paradigm of functional, ‘good’ accounting is established transnationally by way of state transformations in which national idiosyn-crasies are reduced.

The law dimension is explored in Part III. The enforcement and monitor-ing of due process and the rule of law, and hence the production of legal security for citizens and corporations, used to be very much a prerogative of the modern state. However, we observe shifts on the national–interna-tional axis in this dimension. As both Chapter 5 (on judicialization in five different international organizations and regimes, including the United Nations and the GATT/WTO) and Chapter 6 (a comparison of the EU and the WTO) demonstrate, states have in recent decades agreed to, or been sub-jected to, a considerable shift of judicial authority to the international level. This holds especially in the EU context, but also globally for the WTO and other regimes. While compliance with these regimes and their rulings varies, the amount of compliance is certainly not negligible, and hence national law becomes increasingly embedded in, or even confined by, a patchwork of hierarchically ordered (as in the EU) or colliding and competing legal regimes (Joerges and Kjær 2011).

The emergence of a genuinely transnational regime in commercial law is described and explained in Chapter 7. Here we observe private cross-border activities to fill the perceived gap in legal regulation at the national or inter-national level. Such activities rely on the opportunities provided by the new information and communication technologies to compensate for the inca-pacity or unwillingness of states to develop the legal regime that the new reality of global trade and production seems to require. All three chapters


therefore show that the state no longer monopolizes the production of law and legal services, given the accretion of private and transnational or inter-national regimes around the existing national formations of the rule of law.

While states formally remain the principals of international agents such as the European Court of Justice (ECJ) and the WTO Appellate Body, Chapters 5 and 6 raise doubts about the extent to which they still manage to control their agents. A similar story may be told for the emergent private arrange-ments in commercial law, although Chapter 7 also suggests that by simply opening up national courts for proceedings in the language of international business – English – states might be able to recover some of their lost author-ity. Overall, the scenario is one of ‘layering’ (where private and international legal regimes are added to the national ones) and, at least in part, ‘displace-ment’ (where presumably subordinate regimes have become dominant; see Streeck and Thelen 2005, 31).

The two chapters in Part IV probe issues of democratic quality and legit-imacy related to the state and its transformations. The backdrop of both chapters is the argument that the TRUDI state was – and remains – a demo-cratic political regime, and that democratic quality is also the main source of the modern state’s legitimacy. Many sceptics argue that the comparative advantages of international organizations and regimes as efficient providers of solutions for cross-border problems are generally offset by their low demo-cratic quality and related legitimacy deficits (Dahl 1999). To make things worse, international governance arrangements presumably lack a major pre-requisite of democratic governance, namely, a political community with the characteristics of a demos. The existence of a public sphere that meets certain normative requirements is often considered to be a good proxy for the exist-ence of a demos. But whether transnational public spheres and political com-munities satisfy these requirements is disputed even for EU member states and their societies.

As Chapter 8 confirms, national public spheres are quite resilient and a transnational public sphere is slow in the making even in Europe, where conditions would seem to be most favourable. This may well be a problem for securing legitimate democratic governance in the EU, or for other inter-national regimes. Nevertheless, as the findings of Chapter 8 indicate, while national public spheres have not been supplanted by a European sphere, there is at least some evidence for their Europeanization. This partial trans-nationalization in the media and among discursive elites suggests that the EU at least might be able to develop one key prerequisite for legitimacy in the future.

As Chapter 9 shows, though, so far there is little evidence for a shift of legit-imacy from national political systems to international (or private) regimes. Both the levels and the normative foundations of public and discursive sup-port for the latter remain precarious at best (see also Nullmeier et al. 2010; Schneider et al. 2010). Moreover, the Europeanization or internationalization


of political authority does not seem to erode the legitimacy of the democratic nation state, as is frequently claimed. Notwithstanding critical appraisals of the ‘post-democratic’ quality of liberal representative democracy (see, for instance, Crouch 2004; Nullmeier et al. 2015), then, the nation state and its institutions are still the legitimacy ‘anchors’ of the emerging multilevel arrangements, not least because the national claim to democratic legitimacy is more credible in the public eye than is, for instance, the EU’s.

If anything, developments in the wake of the financial market crisis and the current debate on the Transatlantic Trade and Investment Partnership (TTIP) point in the same direction: The legitimacy of the EU and its institu-tions has hardly profited from the role of EU programmes in addressing the crisis or in negotiating presumably efficient trade agreements. Protest against the TTIP is notably motivated by the non-transparency and questionable democratic legitimacy of trade negotiations, and by the envisaged transfer of settlement powers to private arbitration courts – a transfer that is justified as an investors’ protection measure but may lead to the erosion of social and environmental protection standards established in democratic legislative processes. In a nutshell, therefore, state transformations in the legitimacy dimension of the democratic nation state are few and far between.

Finally, transformations in the welfare dimension of the state are examined in the three contributions to Part V. The argument of an erosion of state autonomy and capacity induced by globalization is made most frequently and forcefully for this dimension, and hence it is suggested that a privatiza-tion or erosion of state-produced welfare services or the demise of proac-tive, Keynesian economic policy occurs here (Genschel 2004). On the other hand, this type of literature expects little if any internationalization of state intervention in social policy – with the possible exception of regulatory and court-driven internationalization in the EU (Leibfried 2014).

However, neither Chapter 10 (on developments in key social policy areas in four small open economies) nor Chapter 12 (on changing healthcare regimes in five OECD countries) corroborates the race-to-the-bottom trajec-tory of change in the welfare dimension. Rather, the change in this dimen-sion is multifaceted and hybrid, and the privatization of welfare production is only one element in this development. The most striking effect in the wel-fare dimension is, nevertheless, the convergence of regimes and the result-ant loss of national autonomy. As the two chapters indicate, welfare regimes do converge – but not ‘at the bottom’ (see also Obinger and Starke 2015). Instead, elements of other regimes are integrated into the respective existing national regimes.

Finally, Chapter 11 examines education, a social policy area that is fre-quently overlooked. Interestingly, in this area the case for an internation-alization trend fostered by the OECD and its PISA test programme may be made. As indicated by the third order change of the German system, interna-tionalization has resulted in the convergence of national education regimes


towards the liberal model propagated by the OECD. Overall, while the chap-ters of Part II largely deal with privatization and convergence, the chapters of Part III concentrate more strongly on the internationalization trend. The phenomenon of transnationalization is examined in Chapters 4 and 7. The internationalization axis is also prominent in Part IV, while the chapters of Part V focus on convergence as an outcome of privatization or, in one case, on internationalization. Hence the chapters differ in terms of the specific explananda that they tackle.

Driving forces and modifiers of state change: Explanations of state transformations highlighted in the chapters

What, then, are the variables – driving forces or modifiers – that matter in the explanation of state transformations and what are the related theoretical perspectives? As we suggest in the introduction, a prominent line of reason-ing in the literature on the state and its transformations – the one most closely associated with the ‘end of the state’ scenario – argues that the observed transformations and authority shifts are primarily the outcome of exogenous, non-political driving forces that are beyond the state’s con-trol. From a functionalist perspective, the state appears essentially to be a ‘ victim’ of the driving forces, although the observed transformations – such as welfare cuts – may well be hailed in parts of this literature from a norma-tive perspective.

Among the driving forces highlighted in extant research, economic globalization is certainly the most prominent. Frequently, however, the concept of globalization is underspecified. What aspects does it entail? Is it a truly novel phenomenon or not, especially when compared to the decades before the First World War? Does it affect different parts of the world and states to the same extent or not? Does globalization-induced state change vary in scope and nature across the four TRUDI dimensions? Are plausible causal effects and mechanisms specified where the hypothesis of globaliza-tion-induced transformations is put forward, and is globalization a relevant driving force at all for the specific outcome to be explained?

To be sure, economic globalization is a major trend strongly affecting OECD countries, albeit to a varying extent. Therefore it is hardly surprising that it plays a role in most chapters of the volume. Yet globalization’s role as a driving force has arguably more prima facie plausibility in the dimension of state intervention and welfare production, where the expectation of a race to the bottom in a world of enhanced capital mobility and, therefore, more ‘exit/voice’ opportunities for (multinational) corporations are indeed wide-spread, than in the other TRUDI dimensions.

Chapter 10 offers a particularly meticulous discussion of globalization and submits that it truly is a driving force of change and convergence, together with the problem pressure created by ‘new social risks’. However, on closer


inspection, it turns out that this convergence is not of the race-to-the- bottom variety, as welfare states rather converge towards hybrid regimes that merge elements of ‘pure’ regime types and engage in a considerable amount of mutual observation and learning – a finding that is closely mirrored by Chapter 12 on healthcare regimes. In order to explain such outcomes, one needs to consider various sets of modifiers (for instance, actors and their interests, or ideas), as the two chapters do.

Of course, economic globalization – and notably the rise of international financial markets – is also an important driver of privatization (Chapter 2), and of the transnationalization of accounting and commercial law regimes (Chapters 4 and 7). Yet there is often less convergence than expected (as suggested by Chapter 3 on employment regimes), or the convergence is not accurately described as a race to the bottom either. None of these chapters finds the sweeping globalization-induced deregulation that major parts of the literature hypothesize. On the contrary, privatization goes hand in hand with re-regulation. Chapters 4 and 7 describe and explain a shift of regula-tory competencies to, and the emergence of judicial authority in, transna-tional arrangements rather than the withering away of such authority.

A single-minded focus on economic globalization also risks neglecting the role of other pertinent driving forces. Thus, Chapter 7 highlights the role of innovation in modern information and communication technolo-gies as a driving force in its own right. And while globalization creates new problems and challenges for corporate actors, technological innovation provides unforeseen opportunities to solve them, even without state support. In a similar vein, Chapter 12 points to the problems for healthcare regimes created by demographic change on the one hand and to the ambivalent role of technological innovation in medicine on the other. Such innova-tion brings new opportunities but also increases costs for medical practition-ers and healthcare regimes against the backdrop of perceived limitations on publicly financed health expenditures.

The revolutionary change in information and communication technolo-gies, in turn, underpins the international diffusion of ideas and the related change and convergence of belief systems. Their role as a driving force of state change is examined in many of the chapters in the vein of constructivist theoretical approaches (see also Gilardi 2012). Chapter 3, for instance, considers the spread of the New Public Management discourse, while Chapter 4 examines the role of diffusion in the ‘epistemic communities’ of international accounting firms and professional networks. The qualitative analysis in Chapter 8 of the mechanisms at play in newsrooms across Europe when EU-related topics are covered highlights the growing role of cognitive and normative frames of ‘Europe’ alongside persistent national framings (see also Fligstein 2008; Checkel and Katzenstein 2009).

Finally, a number of chapters probe the role of political internationalization – the creation of international organizations and regimes dealing with specific


policy issues, or authority shifts towards them – as driving forces of state change. To be sure, the move towards international cooperation is initially a state-sponsored process, based on international treaties negotiated by govern-ments and ratified by parliaments. In this sense, states remain the principals of the regimes they have created, and hence political internationalization is not really an exogenous driving force. The same argument can, however, be made for other driving forces including globalization. For instance, the first steps towards the internationalization of financial markets were made by national governments in the 1970s and 1980s after the dismantling of the post-war Bretton Woods system (Helleiner 1994, 2014). Yet once such processes have been triggered and international regimes – to say nothing of supranational ones such as the EU – are set up, these regimes may take on a life of their own and become drivers of state transformations in their own right.

Chapters 5 and 6 are particularly relevant here. Chapter 5 offers a discussion of the hurdles that need to be overcome before states agree to cooperate and credibly commit to the rules of established international regimes. Whether these hurdles are overcome or not, which rules and norms are built into regimes and how much compliance these regimes ultimately enforce is very much a function of the interests and constellations of state actors in the intergovernmental negotiations that precede their establishment. Once these regimes exist, though, they may be powerful enough to force state change. Chapter 6 demonstrates that while the institutions of the EU are technically creatures of the member states, the ECJ (and to a lesser degree the Appellate Body of the WTO) has now achieved a position that makes it an independent driver of change in policy regimes and, ultimately, of state transformations. Chapter 11 on education system developments in England and Germany shows that even without any formal enforcement power, international regimes may become the sources and advocates of policy ideas that trigger change in an important field of state activity.

Chapter 8 (on the transnationalization of public spheres) and Chapter 9 (on the legitimation of the nation state) also examine political internation-alization and Europeanization as potential drivers of state transformations. While Chapter 8 finds that European integration – combined with a pro-active EU information policy – has fostered a certain degree of ‘vertical’ Europeanization in media discourses, though not the emergence of a fully fledged European public sphere, Chapter 9 shows that the negative impact of political internationalization on the legitimacy of the nation state is much weaker than is often assumed.

Where driving forces have a weaker effect than hypothesized or no impact at all, or where we observe national differences in the scope, nature or timing of reactions to such triggers of state change, additional variables – the modifiers of our explanatory heuristic – need to be considered. As outlined in the introduction, the heuristic includes three groups of modifiers: actors and their interests, ideas and institutions.


The preferences, strategic behaviour and constellations of key state or non-state actors are the focus of actor-centred perspectives. As we suggested in the introduction, functionalist explanations of the emergence or transformation of state institutions – explanations that demonstrate that these institutions are efficient producers of public goods or services – remain unconvincing as long as it has not been shown how the ever-present collective action problems in the production of public goods have been overcome.

Although they do not offer strictly rational-choice or game-theoretical analyses, Chapters 4 and 7 (on the rise of transnational accounting and com-mercial law regimes that, first and foremost, serve the interests of economic actors) are perhaps most clearly informed by the notion that cost–benefit or risk calculations matter for explaining policy and institutional reforms. A transnational accounting or commercial law regime would presumably not have developed against the vested interests of prominent economic and state actors had they considered the transaction costs to be too high, or had they not found mutually acceptable solutions to the problems of cred-ible commitment, free-riding and shirking that non-hierarchical, voluntary arrangements – such as the ‘old’ and the ‘new’ lex mercatoria – invariably entail. As Chapter 7 also suggests, a supranational commercial law regime might, in principle, be a functional solution to the problems that transna-tional arrangements such as the lex mercatoria address. The interests of actors need to be considered, then, to understand why one ‘equilibrium’ solution was chosen over another.

The greater or lesser organizational capacity and influence of different actor types such as trade unions and employers’ associations, or different party families, and the constellations or arrangements they are involved in – for instance, pluralist or corporatist and more or less conflictive ones – also impact on the scope and nature of state transformations triggered by driving forces such as those discussed above. Chapters 2, 10 and 12, for instance, examine the role of corporatism and of differences in the partisan composi-tion of governments. As was to be expected, the vested interests of powerful actors – whether in the economic sphere or in governments – may prevent or slow down transformations, and hence variation in interest group and party systems often account for divergent national trajectories.

However, constructivist and ideational perspectives have been able to show that perceptions and interests are not ‘objectively’ given, but rather socially constructed. Thus belief systems and ideas – whose role in policy diffusion and learning across borders we have already discussed – might have to be considered as a second set of modifiers. What matters here is the general inertia of belief systems and national political cultures. It is a well-established notion in policy studies and the welfare state literature that the ideologically anchored core and policy beliefs of key actors tend to be stable and therefore reduce the likelihood of major policy and institutional reforms (Sabatier and Jenkins-Smith 1999).


Unsurprisingly, then, all three chapters in Part V point to the role of such regime-specific ideas and norms – a role that is perhaps most conspicuous in Chapter 11 on education regimes, even though the case of massive reforms in Germany illustrates that policy beliefs are not always resistant to change. Similarly, Chapters 8 and 9 highlight the role of discursive cultures in medi-ating the impact of globalization and political internationalization on pub-lic communication. The inertia of these cultures goes a long way towards explaining why a genuinely European public sphere has not yet emerged and why political internationalization has not significantly eroded the legiti-macy of the democratic nation state. On the other hand, policy learning can be a major source of convergence, as demonstrated in Chapter 12 (see also Schmid and Götze 2009).

Finally, most chapters examine the role of institutions and thus draw on some version of the new institutionalism to explain the divergent trajectories of state change. The prominent role of institutions in the explanation of con-tinuity and change, or of different national trajectories of change, is strongly confirmed. An explicit path dependency argument is made in Chapter 6, and also in Chapters 4, 5 and 12. As Chapter 4 stresses, driving forces such as globalization, emerging professional networks or exogenous shocks – for instance, corporate crises or the post-2008 financial market crisis – will, when not constrained by institutional arrangements, lead to coercive, normative and mimetic isomorphism not just in the case of accounting regulation. The same holds for policy and institutional developments in other TRUDI dimensions. Chapter 5 discusses the ways in which institutional factors at the international level affect state behaviour and decisions in international regimes. Based on information about the rules and norms built into international dispute set-tlement procedures, states can assess the likelihood of a ruling in their favour and rely on their assessments when deciding on the (non-)referral of a dispute.

In Chapter 6, the ‘lock-in’ mechanism that has enabled the ECJ, and to a much lesser extent the WTO Appellate Body, to gain and defend consider-able judicial authority is elaborated in detail, illustrating the path-dependent evolution of the European court system’s legal reasoning on market free-doms and its transfer from the free movement of goods to other contexts – a process that has even led to intrusions into fields of national sovereignty such as the provision of health services (Greer 2006). By contrast, in the context of WTO dispute settlement, the role of precedents is contested. As a consequence, actor preferences and constellations have more weight and, given the importance of US–EU leadership, deliberate off-path change in the trajectories of international trade law is more likely. As is readily appar-ent, none of the chapters rely exclusively on driving forces to explain the privatization, internationalization or convergence of state activity, and most highlight the role of several (bundles of) modifiers – often along the lines of the different variants of the new institutionalism and, hence, combining actor-related or ideational and institutional factors.


State change in the OECD world: Generalizations and conjectures

It is now time to probe the extent to which we can draw generalizations from such case- or dimension-specific findings. Are there any findings that hold for the TRUDI state in general, across all dimensions and national variants? Our final remarks all relate to our characterization of state change as a com-plex and multidimensional, even sometimes asymmetrical and contradic-tory, set of explananda.

First of all, we must make sure that we got the story right, and hence detailed descriptions of the explananda are of crucial relevance. As all chap-ters in this volume should have made clear, state transformations are not as straightforward as simplified accounts may suggest. Rather, state change is multifaceted and may only be described properly by disentangling its dimensions. Only when the kinds of state transformation we observe have been described correctly, adequate explanation can start.

The second remark is methodological in nature. At first glance, it would seem promising to base research into state transformations or the conver-gence of policies and institutional arrangements more strongly on available international data sets such as the OECD’s – and on the statistical methods these large data sets permit – than most chapters did. Starke and Obinger – themselves important contributors to the more quantitatively oriented, hypothesis-testing tradition in comparative welfare state research – point out in Chapter 10, however, that this type of research has reached an impasse. A plethora of books and journal articles have, for instance, probed the scope of social policy retrenchment – with inconclusive and even contradictory findings. As Starke and Obinger emphasize, there is evidence to corroborate both the efficiency hypothesis, which expects a strong and convergent retrenchment trend, and the compensation hypothesis, according to which a strong welfare state is required to compensate for the effects of globaliza-tion and hence is likely to survive (see also Genschel 2004).

The ambiguous nature of empirical findings is, in part, due to methodo-logical issues that could hamper statistical work on other TRUDI dimensions even more than on the welfare dimension, where quantitative indicators are readily available and least equivocal. Firstly, there is the small-N prob-lem (Lieberson 1991) in research on the TRUDI state, which can only draw on roughly 30 cases. To overcome this limitation, comparative social policy research has begun to use time series cross-sectional research designs, thus multiplying the number of cases by the number of observation years. This approach creates new problems, as annual observations are usually auto-correlated. Of course, technical ploys have been developed to cope with such problems, and they are statistically sophisticated, but it remains disputed whether they can really solve the underlying ‘small N, too many variables’ issue (Kittel and Winner 2005).


Secondly, the welfare state – and a fortiori the TRUDI state as a whole – is multifaceted. Even in a single dimension or policy area, parameter changes quite often seem to contradict each other, the meaning of available indica-tors is frequently ambiguous, and it remains unclear how they should be weighted. Should we, for instance, speak of welfare retrenchment where the number of beneficiaries has increased but benefits have been cut, as in the ‘classic’ example of the Oregon Health Plan (Hadorn 1992)? Likewise, what should we conclude when we observe that unemployment benefits have been cut while unemployment growth leads to higher welfare spend-ing, or when cuts in one area are combined and possibly outweighed by new benefits – such as long-term care programmes – in others (Siegel 2002; Österle and Rothgang 2010; Colomba et al. 2011)? Similar ambiguities occur in the three other TRUDI dimensions.

With statistical analysis alone we cannot adequately measure state trans-formations, differentiate between first, second and third order changes, or separate the ‘wheat’ of genuine state transformations from the ‘chaff’ of less consequential change. In addition, a qualitative, interpretive approach is required to determine what the observed parameter changes mean. It is there-fore not without reason that the majority of chapters of this volume rely – solely, or combined with statistical analysis – on qualitative comparisons of a small number of cases. In short, the analysis of state transformations requires the combination of quantitative and interpretive approaches in mixed-method designs.

The third general remark is a theoretical one. One robust overall finding of this volume stands out, namely, the importance of a theoretical pluralism or eclecticism: When it comes to the explanation of state change, it is quite obvious that no single, ‘pure’ and parsimonious theoretical perspective relying on a limited number of explanatory variables or causal mecha-nisms is able to account for the considerable variation across countries, TRUDI dimensions and policy areas documented in the chapters of Parts II to V. The chapters reveal that each of the prominent theoretical approaches reviewed in the introduction has its comparative advantages and blind spots. Only a combination of theoretical approaches – sometimes with an emphasis on one or another perspective, as required for the explanation of a specific kind of state transformation – is presumably up to the task of explaining the state transformations of the past couple of decades. The the-oretical approaches considered in this volume (and possibly others) should therefore not be viewed as competing but rather as potentially comple-mentary, and parsimony is arguably a less important or realistic objective than accuracy once the transformations of the TRUDI state at large are considered.

Yet even the explanation of transformations in each of the TRUDI dimensions often requires multidimensional explanatory models, although it is readily apparent that some of the generic driving forces and


modifiers outlined in the introduction have greater or lesser weight in the explanation of particular outcomes. At the level of individual TRUDI dimensions, it may therefore be possible to formulate somewhat more par-simonious explanatory models. To be sure, the role of driving forces such as globalization and demographic and value changes is largely confirmed, but not all have the same weight in different contexts and their impact is sometimes weaker than expected – a point we notably made with a view to globalization. There is arguably not a single chapter in this volume from which we might infer that state transformations are fostered exclu-sively by such driving forces and the problem pressure they create, or that argues that a functionalist explanation alone suffices to make sense of the observed change.

To explain why different states react more or less strongly to driving forces, and why they converge to a greater or lesser extent, the explanatory mod-els of the individual chapters therefore consider three bundles of modifiers or intervening variables that may prevent or slow down transformations pushed by driving forces and impede a more wide-ranging convergence: actors and interests, ideas and institutions. These modifiers explain why we observe different national trajectories of state change – or occasionally no change at all. The notions of policy legacies and path dependency fit here, and they may be linked in turn with actors and their interests, with ideas and with institutions.

The fourth and final remark relates to an important substantive message tucked away in our complex descriptive findings on state transformations. One might ask whether the state is essentially a ‘victim’ of driving forces, a mere ‘taker’ of policy and institutional transformations imposed by dynamics and processes beyond its control. This is notably the interpreta-tion of those who suggest that globalization leads to a race-to-the-bottom convergence of state policies and institutions. Or is the state the master of its own transformations, as suggested by those who doubt that the state has been withering away and submit that it remains, at the very least, a key player in global governance? Can state actors, in other words, prevent or slow down some of these transformations, or can they channel them in a particular direction, thus defending a modicum of state autonomy and capacity?

Here we argued that while the modern state has indeed undergone important transformations, and its role has shifted from ‘monopolist’ to ‘manager’ in the production of public goods and services, it generally not only remains a key player in producing public goods, but also in transform-ing itself. Therefore the modifiers in our heuristic matter a lot, and we find quite different trajectories of state change. And while one would indeed hesitate to see the state as the master of all ongoing transformations, at least some of them may be self-transformations in the sense that they have been triggered by state actors and these actors maintain a modicum of control


over their scope and nature, as is demonstrated by the different national trajectories of change. This is particularly true for globalization, which now-adays is mostly perceived as an exogenous driving force while in fact state regulation has not only been responsible for triggering globalization but also channels it to some extent.

Notes

1 For magisterial overviews of these perspectives, their historical development and their shortcomings, see Genschel and Zangl (2014) and Levy et al. (2015).

2 For a broader historical and geographical perspective that includes the OECD world and countries of the Global South, see Leibfried et al. (2015).

265

Bibliography

Abbott, Frederick M. 2000. ‘NAFTA and the Legalization of World Politics: A Case Study’. International Organization 54(3): 519–47.

Abbott, Kenneth W., Robert O. Keohane, Andrew Moravcsik, Anne-Marie Slaughter and Duncan Snidal. 2000. ‘The Concept of Legalization’. International Organization 54(3): 401–19.

——, and Duncan Snidal. 2000. ‘Hard and Soft Law in International Governance’. International Organization 54(3): 421–56.

——, and ——. 2009. ‘Strengthening International Regulation through Transnational New Governance’. Vanderbilt Journal of Transnational Law 42(2): 501–78.

Abée, Stephan. 2010. Die neue Konstellation von Staatlichkeit auf Kapitalmärkten [The New State Constellation in Financial Markets]. Bremen: University of Bremen ( doctoral thesis).

——. 2012. Die Neubestimmung des öffentlichen und privaten Interesses auf Kapitalmärkten [The Redefinition of Public and Private Interests in Financial Markets]. Frankfurt am Main: Peter Lang.

Adam, Silke. 2007. Symbolische Netzwerke in Europa. Der Einfluss der nationalen Ebene auf europäische Öffentlichkeit: Deutschland und Frankreich im Vergleich [Symbolic Networks in Europe. National Influence on the European Public Sphere: Germany and France Compared]. Cologne: Halem.

AIM Research Consortium. 2006. Understanding the Logic of EU Reporting in the Mass Media: Analyses of EU Media Coverage and Interviews in Editorial Offices in Europe. Dortmund: Projektverlag.

Alber, Jens. 2001. ‘Developments of the German Welfare State: Basic Continuity or Paradigm Shift?’ Bremen: University of Bremen, Centre for Social Policy Research (Working Paper 6).

Albert, Mathias, Gesa Bluhm, Jan Hekmig, Andreas Leutzsch and Jochen Walter, eds. 2009. Transnational Political Spaces: Agents – Structures – Encounters. Frankfurt am Main: Campus.

Albrow, Martin. 2003. The Global Age: State and Society Beyond Modernity. Cambridge: Polity Press.

Allison, Graham T. 1971. Essence of Decision: Explaining the Cuban Missile Crisis. Boston: Little, Brown.

Almond, Gabriel A. 1988. ‘The Return to the State’. American Political Science Review 82(3): 853–74.

Altenstetter, Christa, and Reinhard Busse. 2005. ‘Health Care Reform in Germany: Patchwork Change within Established Governance Structures’. Journal of Health Politics, Policy and Law 30(1–2): 121–42.

Alter, Karen J. 1998. ‘Who are the Masters of the Treaty? European Governments and the European Court of Justice’. International Organization 52(1): 121–47.

——. 2003. ‘Do International Courts Enhance Compliance with International Law?’ Review of Asian and Pacific Studies 25: 51–78.

——. 2008. ‘Agents or Trustees? International Courts in Their Political Context’. European Journal of International Relations 14(1): 33–63.

——. 2009. The European Court’s Political Power: Selected Essays. Oxford: Oxford University Press.

266 Bibliography

Amatori, Franco. 2000. ‘Beyond State and Market. Italy’s Futile Search for a Third Way’. In The Rise and Fall of State-owned Enterprise in the Western World, ed. Pier A. Toninelli. Cambridge: Cambridge University Press, 128–56.

Andersen, Svein S., and Tom R. Burns. 1996. ‘The European Union and the Erosion of Parliamentary Democracy: A Study in Post-Parliamentary Governance’. In The European Union: How Democratic Is It?, eds. Svein S. Andersen and Kjell A. Eliassen. London: Sage, 227–51.

Armingeon, Klaus, Philipp Leimgruber, Michelle Beyeler and Sarah Menegale. 2011. Comparative Political Data Set 1960–2006. Bern: University of Bern, http://www.ipw.unibe.ch/content/team/klaus_armingeon/comparative_political_data_sets/index_ger.html (last accessed 25 August 2014).

Auby, Jean-François, and Olivier Raymundie. 2003. Le service public: Droit national et droit communautaire, régime juridique et catégories, modes de gestion [The Public Service: National and European Law, Legal Regime and Categories, Modes of Administration]. Paris: Le Moniteur.

Auel, Katrin, and Arthur Benz. 2007. ‘Expanding National Parliamentary Control: Does It Enhance European Democracy?’ In Debating the Democratic Legitimacy of the European Union, eds. Beate Kohler-Koch and Berthold Rittberger. Lanham: Rowman and Littlefield, 57–74.

Baisnée, Olivier. 2007. ‘The European Public Sphere Does Not Exist (At Least It’s Worth Wondering)’. European Journal of Communication 22(4): 493–503.

Baldi, Gregory. 2012. ‘Schools with Differences: Policy Discourse in Education Reform in Britain and Germany’. West European Politics 35(5): 999–1023.

Ball, Ray. 2006. ‘International Financial Reporting Standards (IFRS): Pros and Cons for Investors’. Accounting and Business Research 36(1): 5–27.

Ball, Stephen J. 2008. The Education Debate: Policy and Politics in the Twenty-First Century. Bristol: Policy Press.

Bambra, Clare. 2004. ‘Weathering the Storm: Convergence, Divergence and the Robustness of the Worlds of Welfare’. Social Policy Journal 3(3): 3–23.

Bargain, Olivier, and Blaise Melly. 2008. ‘Public Sector Pay Gap in France: New Evidence Using Panel Data’. Bonn: Institute for the Study of Labour (Discussion Paper Series IZA DP 3427).

Barker, Rodney. 2001. Legitimating Identities: The Self-Presentation of Rulers and Subjects. Cambridge: Cambridge University Press.

Barnard, Catherine. 2004. The Substantive Law of the EU: The Four Freedoms. Oxford: Oxford University Press.

Barnett, Michael. 2002. ‘Historical Sociology and Constructivism: An Estranged Past, a Federated Future?’ In Historical Sociology of International Relations, eds. Stephen Hobden and John M. Hobson. Cambridge: Cambridge University Press, 99–119.

——, and Martha Finnemore. 2004. Rules for the World: International Organizations in Global Politics. Ithaca: Cornell University Press.

Barr, Nicholas, Howard Glennerster and Julian LeGrand. 1989. ‘Working for Patients? The Right Approach?’ Social Policy and Administration 23(2): 117–27.

Barrow, Clyde W. 1993. Critical Theories of the State: Marxist, Neo-Marxist, Post-Marxist. Madison: University of Wisconsin Press.

Baskerville, Rachel F. 2003. ‘Hofstede Never Studied Culture’. Accounting, Organizations and Society 28(1): 1–14.

Bassant, Eric. 2007. Ziekenfonds of particulier? Hoe de basisverzekering er toch is gekomen [Private Sickfunds? How Basic Insurance Has Come After All]. Maarssen: Elsevier gezondheidszorg.

Bibliography 267

Baumert, Jürgen, Petra Stanat and Anke Demmrich. 2001. ‘PISA 2000: Untersuchungs-gegenstand, theoretische Grundlagen und Durchführung der Studie’ [PISA 2000: Object, Theoretical Foundations and Implementation of the Study]. In PISA 2000: Basiskompetenzen von Schülerinnen und Schülern im internationalen Vergleich, ed. Deutsches PISA-Konsortium. Opladen: Leske & Budrich, 15–68.

Beck, Ulrich, and Elisabeth Beck-Gernsheim. 2002. Individualization: Institutionalized Individualism and Its Social and Political Consequences. London: Sage.

——, and Edgar Grande. 2007. Cosmopolitan Europe. Oxford: Polity Press.Beetham, David. 1991. The Legitimation of Power. Basingstoke: Palgrave Macmillan.Behrens, Peter. 2000. ‘Weltwirtschaftsverfassung’ [The Constitution of the World

Economy]. Jahrbuch für Neue Politische Ökonomie 19: 5–27.Bekke, Hans A.G.M., and Frits M. van der Meer, eds. 2000. Civil Service Systems in

Western Europe. Cheltenham: Edward Elgar.Béland, Daniel. 2005. ‘Ideas and Social Policy: An Institutional Perspective’. Social

Policy and Administration 39(1): 1–18.——, and Robert H. Cox, eds. 2011. Ideas and Politics in Social Science Research.

New York: Oxford University Press.Bennett, Andrew, and Colin Elman. 2006. ‘Qualitative Research: Recent Developments

in Case Study Methods’. Annual Review of Political Science 9: 455–76.Benzacar, Karine. 2008. ‘IFRS: The Next Accounting Revolution’. CMA Management

82(4): 26–30.Berger, Peter L., and Thomas Luckmann. 1967. The Social Construction of Reality:

A Treatise in the Sociology of Knowledge. London: Penguin.Bernhardt, Rudolf. 1995. ‘Reform of the Control Machinery under the European

Convention on Human Rights: Protocol No. 11’. American Journal of International Law 89(1): 145–54.

Beyer, Jürgen. 2006. Pfadabhängigkeit: Über institutionelle Kontinuität, anfällige Stabilität und fundamentalen Wandel [Path Dependency: On Institutional Continuity, Frail Stability and Radical Change]. Frankfurt am Main: Campus.

Bhala, Raj. 1999. ‘The Precedent Setters. De Facto Stare Decisis in WTO Adjudication: Part Two of a Trilogy’. Journal of Transnational Law and Policy 9(1): 1–151.

Bhimani, Alnoor. 1999. ‘Mapping Methodological Frontiers in Cross-National Management Control Research’. Accounting, Organizations and Society 24(4–5): 413–40.

Biersteker, Thomas J. 2002. ‘Forms of State, States of Sovereignty: The Changing Meanings of State, Sovereignty and Territory in the Theory and Practice of International Relations’. In Handbook of International Relations, eds. Walter Carlsnaes, Thomas Risse and Beth A. Simmons. London: Sage, 157–76.

Blair, Tony. 2006. Speech to the Labour Party’s Centenary Conference, February 10. Blackpool, http://www.britishpoliticalspeech.org/speech-archive.htm

Blanke, Bernhard, Stephan von Bandemer, Frank Nullmeier and Göttrik Wewer, eds. 2005. Handbuch zur Verwaltungsreform [Handbook of Administrative Reform], 3rd edition. Wiesbaden: VS.

Blinder, Alan. 1973. ‘Wage Discrimination: Reduced Form and Structural Estimates’. Journal of Human Resources 8(4): 436–55.

Blome, Kerstin, and Alexander Kocks. 2009. ‘Judizialisierungsprozesse im Menschenrechtsbereich: Erfolgsmodell EGMR’ [Judicialization in the Human Rights Area: The ECHR as a Model of Success]. In Auf dem Weg zu internationaler Rechtsherrschaft? Streitbeilegung zwischen Politik und Recht, ed. Bernhard Zangl. Frankfurt am Main: Campus, 229–66.

268 Bibliography

Blyth, Mark M. 1997. ‘Any More Bright Ideas? The Ideational Turn of Comparative Political Economy’. Comparative Politics 29(2): 229–50.

——. 2002. Great Transformations: Economic Ideas and Institutional Change. Cambridge: Cambridge University Press.

——. 2003. ‘Structures Do Not Come with an Instruction Sheet: Interests, Ideas, and Progress in Political Science’. Perspectives on Politics 1(4): 695–706.

Bogart, Dan. 2009. ‘Nationalizations and the Development of Transport Systems: Cross-Country Evidence from Railroad Networks, 1860–1912’. Journal of Economic History 69(1): 202–37.

Böhm, Franz. 1933. Wettbewerb und Monopolkampf: Eine Untersuchung zur Frage des wirtschaftlichen Kampfrechts und zur Frage der rechtlichen Struktur der geltenden Wirtschaftsordnung [Competition and the Struggle over Monopoly: A Study on the Law of Economic Struggles and on the Legal Structure of the Present Economic Order]. Berlin: Carl Heymanns.

——. 1937. Die Ordnung der Wirtschaft als geschichtliche Aufgabe und rechtsschöpferische Leistung [The Ordering of the Economy as a Historical Challenge and Legal Innovation]. Stuttgart: Kohlhammer.

——. 1966. ‘Privatrechtsgesellschaft und Marktwirtschaft’ [The Private-Law Society and the Market Economy]. ORDO 17: 75–151.

Böhm, Katharina, Achim Schmid, Ralf Götze, Claudia Landwehr and Heinz Rothgang. 2013. ‘Five Types of OECD Healthcare Systems: Empirical Results of a Deductive Classification’. Health Policy 113(1): 258–69.

Boivin, Isabelle, and Alberto Odero. 2006. ‘The Committee of Experts on the Application of Conventions and Recommendations: Progress Achieved in National Labour Legislation’. International Labour Review 145(3): 207–20.

Boix, Carles. 1997. ‘Privatizing the Public Business Sector in the Eighties: Economic Performance, Partisan Responses and Divided Governments’. British Journal of Political Science 27(4): 473–96.

Bork, Robert H. 1978. The Antitrust Paradox: A Policy at War with Itself. New York: Basic Books.

Bortolotti, Bernardo, Marcella Fantini and Domenico Siniscalco. 2003. ‘Privatisation around the World: Evidence from Panel Data’. Journal of Public Economics 88(1–2): 305–32.

Börzel, Tanja, and Thomas Risse. 2000. ‘When Europe Hits Home: Europeanization and Domestic Change’. European Integration Online Papers 4(15), http://eiop.or.at/eiop/texte/2000-015a.htm (last accessed 25 August 2014).

Bos, Wilfried, and Thomas N. Postlethwaite. 2002. ‘Internationale Schulleistungs-forschung: Ihre Entwicklungen und Folgen für die deutsche Bildungslandschaft’ [International Research on School Performance: Its Development and Consequences for the German Education Landscape]. In Leistungsmessungen in Schulen, 2nd edi-tion, ed. Franz E. Weinert. Weinheim: Beltz, 251–67.

Boudon, Raymond. 1998. ‘Limitations of Rational Choice Theory’. American Journal of Sociology 104(3): 817–28.

Bourgeois, Jacques H.J. 2001. ‘Some Reflections on the WTO Dispute Settlement System from a Practitioner’s Perspective’. Journal of International Economic Law 4(1): 145–54.

Bradshaw, Peter L. 2003. ‘Modernizing the British National Health Service (NHS): Some Ideological and Policy Considerations’. Journal of Nursing and Management 11(2): 85–90.

Braun, Bernard, Hagen Kühn and Hartmut Reiner. 1998. Das Märchen von der Kostenexplosion: Populäre Irrtümer zur Gesundheitspolitik [The Fairy Tale about a Cost Explosion: Popular Errors in Health Policy]. Frankfurt am Main: Fischer.

Bibliography 269

Bröhmer, Jürgen. 2007. ‘Der Kapital- und Zahlungsverkehr’ [Capital Movement and Foreign Direct Payments]. In EUV/EGV. Das Verfassungsrecht der Europäischen Union mit Europäischer Grundrechtecharta: Kommentar, eds. Christian Calliess and Matthias Ruffert. Munich: Beck, Title IV, Chapter 4 (Arts. 63–6).

Bronckers, Marco C.E.J. 2008. ‘Private Appeals to WTO Law: An Update’. Journal of World Trade 42(2): 245–60.

Broude, Tomer. 2004. International Governance in the WTO: Judicial Boundaries and Political Capitulation. London: Cameron May.

Brown, Gordon. 2010. Speech on Education at Woodberry Down Community Primary School in Hackney, 23 February. London, http://www.britishpoliticalspeech.org/speech-archive.htm

Brown, R.G. 1979. Reorganising the National Health Service: A Case Study in Administrative Change. Oxford: Blackwell.

Brüggemann, Michael, Andreas Hepp, Katharina Kleinen-von Königslöw and Hartmut Wessler. 2009. ‘Transnationale Öffentlichkeit in Europa: Forschungsstand und Perspektiven’ [The Transnational Public Sphere in Europe: State of Research and Research Perspectives]. Publizistik 54(3): 391–414.

——, and Katharina Kleinen-von Königslöw. 2009. ‘Let’s Talk About Europe: Why Europeanization Shows a Different Face in Different Newspapers’. European Journal of Communication 24(1): 27–48.

Bulmer, Simon, and William E. Paterson. 2010. ‘Germany and the European Union’. International Affairs 86(5): 1051–73.

Burgoon, Brian. 2001. ‘Globalization and Welfare Compensation: Disentangling the Ties that Bind’. International Organization 55(3): 509–51.

Burley, Anne-Marie, and Walter Mattli. 1993. ‘Europe Before the Court: A Political Theory of Legal Integration’. International Organization 47(1): 41–76.

Busemeyer, Marius. 2009. ‘From Myth to Reality: Globalisation and Public Spend-ing in OECD Countries Revisited’. European Journal of Political Research 48(4): 455–82.

Bushman, Robert M., Joseph D. Piotroski and Abbie J. Smith. 2004. ‘What Determines Corporate Transparency?’ Journal of Accounting Research 42(2): 207–52.

Bzdera, André. 1993. ‘Comparative Analysis of Federal High Courts: A Political Theory of Judicial Review’. Canadian Journal of Political Science 26(1): 3–29.

Cacace, Mirella. 2010a. Das Gesundheitssystem der USA: Governance-Strukturen staatlicher und privater Akteure [The US Health System: The Governance Landscape of Public and Private Actors]. Frankfurt am Main: Campus.

——. 2010b. ‘The US Healthcare System: Hierarchization With and Without the State’. In The State and Healthcare: Comparing OECD Countries, eds. Heinz Rothgang, Mirella Cacace, Lorraine Frisina, Simone Grimmeisen, Achim Schmid and Claus Wendt. Basingstoke: Palgrave Macmillan, 180–234.

Calliess, Gralf-Peter. 2004. ‘Value-added Norms, Local Litigation, and Global Enforcement: Why the Brussels-Philosophy Failed in The Hague’. German Law Journal 5(12): 1489–98 (online journal).

——. 2011. ‘Englisch als Gerichtssprache und Öffentlichkeitsprinzip’ [English as an Official Court Language]. In Festschrift für Franz Jürgen Säcker, eds. Detlev Joost, Hartmut Oetker and Marian Paschke. Munich: Beck, 1045–51.

——, Thomas Dietz, Wioletta Konradi, Holger Nieswandt and Fabian Sosa. 2007. ‘Transformations of Commercial Law: New Forms of Legal Certainty for Globalized Exchange Processes?’ In Transforming the Golden-Age Nation State, eds. Achim Hurrelmann, Stephan Leibfried, Kerstin Martens and Peter Mayer. Basingstoke: Palgrave Macmillan, 83–108.

270 Bibliography

——, and Hermann Hoffmann. 2009a. ‘Effektive Justizdienstleistungen für den globalen Handel’ [Effective Judicial Services for Global Trade]. Zeitschrift für Rechtspolitik 42(1): 1–4.

——, and ——. 2009b. ‘Legal Services for International Commerce – Made in Germany?’ German Law Journal 10(2): 115–22 (online journal).

——, and ——. 2010. ‘Kammern für internationale Handelssachen – folgt die Justiz der Anwaltschaft auf dem Weg in die Globalisierung?’ [Chambers for International Trade Cases – Do the Courts Follow the Lawyers on the Road to Globalization?]. Mitteilungen der Bundesrechtsanwaltskammer (6): 247–51.

——, and Jens Michael Mertens. 2010. ‘Privatrecht und Wettbewerbspolitik in der Globalisierung’ [Private Law and Competition Policy under Globalization]. Rabels Zeitschrift für ausländisches und internationales Privatrecht 74(3): 463–92.

——, —— and Moritz Renner. 2013. ‘Privatizing the Economic Constitution: Can the World Market Reproduce Its Own Institutional Prerequisites?’ In European Yearbook on International Economic Law, vol. 4, eds. Christoph Herrmann, Markus Krajewski and Jörg P. Terhechte. Berlin: Springer, 201–22.

——, and Moritz Renner. 2009. ‘Transnationalizing Private Law – The Public and the Private Dimensions of Transnational Commercial Law’. German Law Journal 10(10): 1341–55 (online journal).

Canaris, Claus-Wilhelm. 2000. ‘Wandlungen des Schuldvertragsrechts – Tendenzen zu seiner “Materialisierung”’ [Changes in the Law of Debt Contracts – Trends toward ‘Materialization’]. Archiv für die civilistische Praxis 200: 273–364.

Card, David. 1996. ‘The Effect of Unions on the Structure of Wages: A Longitudinal Analysis’. Econometrica 64(4): 957–79.

Carey, David. 2008. ‘Improving Education Outcomes in Germany’. Paris: OECD, Economics Department (Working Paper 611).

Carlsson, Bo. 1988. ‘Public Industrial Enterprises in Sweden: Searching for a Viable Structure’. Annals of Public and Cooperative Economics 59(2): 175–95.

Carreras, Albert, Xavier Tafunell and Eugenio Torres. 2000. ‘The Rise and Decline of Spanish State-owned Firms’. In The Rise and Fall of State-owned Enterprise in the Western World, ed. Pier A. Toninelli. Cambridge: Cambridge University Press, 208–36.

Cass, Deborah Z. 2001. ‘The Constitutionalization of International Trade Law: Judicial Norm Generation as the Engine of Constitutional Development in International Trade’. European Journal of International Law 12(1): 39–75.

Castells, Manuel. 2004. The Power of Identity, 2nd edition. Oxford: Blackwell.Castles, Francis G. 1985. The Working Class and Welfare: Reflections on the Political

Development of the Welfare State in Australia and New Zealand 1890–1980. Sydney: Allen and Unwin.

——. 1989. ‘Social Protection by Other Means: Australia’s Strategy of Coping with External Vulnerability’. In The Comparative History of Public Policy, ed. Francis G. Castles. Cambridge: Polity Press, 16–55.

——. 2004. The Future of the Welfare State: Crisis Myths and Crisis Realities. Oxford: Oxford University Press.

Cerny, Philip G. 1990. The Changing Architecture of Politics: Structure, Agency and the Future of the State. London: Sage.

——. 2010. Rethinking World Politics: A Theory of Transnational Neopluralism. Oxford: Oxford University Press.

Chadeau, Emmanuel. 2000. ‘The Rise and Decline of State-owned Industry in Twentieth-Century France’. In The Rise and Fall of State-owned Enterprise in the Western World, ed. Pier A. Toninelli. Cambridge: Cambridge University Press, 185–207.

Bibliography 271

Charnovitz, Steve. 2002. ‘Judicial Independence in the World Trade Organization’. In International Organizations and International Dispute Settlement: Trends and Prospects, eds. Laurence Boisson de Chazournes, Cesare Romano and Ruth Mackenzie. Ardsley: Transnational Publishers, 219–40.

Chayes, Abram, and Antonia Handler Chayes. 1993. ‘On Compliance’. International Organization 47(2): 175–205.

Checchi, Daniele, Jelle Visser and Herman van de Werfhorst. 2007. ‘Inequality and Union Membership: The Influence of Relative Earnings and Inequality Attitudes’. British Journal of Industrial Relations 48(1): 84–108.

Checkel, Jeffrey T., and Peter J. Katzenstein, eds. 2009. European Identity. Cambridge: Cambridge University Press.

Chitty, Clyde. 2002. ‘The Role and Status of LEAs: Post-war Pride and Fin de Siècle Uncertainty’. Oxford Review of Education 28(2–3): 261–73.

Chua, Wai Fong, and Stephen L. Taylor. 2008. ‘The Rise and Rise of IFRS: An Examination of IFRS Diffusion’. Journal of Accounting and Public Policy 27(6): 462–73.

Clark, Nick, and Robert Rohrschneider. 2009. ‘Second-Order Elections versus First-Order Thinking: How Voters Perceive the Representation Process in a Multi-Layered System of Governance’. Journal of European Integration 31(5): 645–64.

Clifton, Judith, Francisco Comín and Daniel Díaz-Fuentes. 2003. Privatisation in the European Union: Public Enterprises and Integration. Dordrecht: Kluwer Academic Publishers.

——, —— and ——. 2006. ‘Privatizing Public Enterprises in the European Union 1960–2002: Ideological, Pragmatic, Inevitable?’ Journal of European Public Policy 13(5): 736–56.

Coase, Ronald H. 1937. ‘The Nature of the Firm’. Economica 4(16): 386–405.——. 1988. The Firm, the Market, and the Law. Chicago: University of Chicago Press.Cockerham, Geoffrey B. 2007. ‘The Delegation of Dispute Settlement Authority to

Conventional International Governmental Organizations’. International Politics 44(6): 732–52.

Coleman, James S. 1990. Foundations of Social Theory. Cambridge, MA: Belknap Press of Harvard University Press.

Collins, Philip. 2009. ‘Why Finland is Best for Education: In the War to Create the World’s Best Schools, the Fight’s to the Finnish. And the Reason for their Success Might Surprise You’. The Times, 8 August, http://www.thetimes.co.uk/tto/education/ article1878618.ece (last accessed 25 August 2014).

Colomba, Francesca, Ana Llena-Nozal, Jérôme Mercier and Frits Tjadens. 2011. Help Wanted? Providing and Paying for Long-term Care. Paris: OECD.

Commissie Dekker. 1987. Bereidheid tot Verandering: Rapport van de Commissie Structuur en Financiering Gezondheidszorg [Readiness for Change: Report of the Commission on the Structure and Financing of the Health System]. The Hague: Distributiecentrum Overheidspublicaties.

Cooley, Alexander, and Hendrik Spruyt. 2009. Contracting States: Sovereign Transfers in International Relations. Princeton: Princeton University Press.

Cooper, Scott, Darren Hawkins, Wade Jacoby and Daniel Nielson. 2008. ‘Yielding Sovereignty to International Institutions: Bringing System Structure Back In’. International Studies Review 10(3): 501–24.

Couldry, Nick, and Andreas Hepp. 2012. ‘Comparing Media Cultures’. In The Handbook of Comparative Communication Research, eds. Frank Esser and Thomas Hanitzsch. New York: Routledge, 249–61.

Crossen, Teall E. 2004. ‘Multilateral Environmental Agreements and the Compliance Continuum’. Georgetown International Environmental Law Review 16(3): 473–500.

272 Bibliography

Crouch, Colin. 2004. Post-Democracy. New York: Wiley.Csigó, Monika. 2006. Institutioneller Wandel durch Lernprozesse: Eine neo-institutionalistische

Perspektive [Institutional Change by Learning: A Neo-institutional Perspective]. Wiesbaden: VS.

Cutler, A. Claire. 2003. Private Power and Global Authority: Transnational Merchant Law in the Global Political Economy. Cambridge: Cambridge University Press.

Czerwick, Edwin. 2007. Die Ökonomisierung des öffentlichen Dienstes: Dienstrechtsreformen und Beschäftigungsstrukturen seit 1991 [Economizing the Public Sector: Public Employment Law Reform and Employment Structures since 1991]. Wiesbaden: VS.

Dahl, Robert A. 1999. ‘Can International Organizations be Democratic? A Skeptic’s View’. In Democracy’s Edges, eds. Ian Shapiro and Casiano Hacker-Cordón. Cambridge: Cambridge University Press, 19–36.

Dahlström, Carl, and Victor Lapuente. 2010. ‘Explaining Cross-Country Differences in Performance-Related Pay in the Public Sector’. Journal of Public Administration Research and Theory 20(3): 577–600.

David, Paul A. 1985. ‘Clio and the Economics of QWERTY’. American Economic Review 75(2): 332–7.

Davids, M., and Jan L. van Zanden. 2000. ‘A Reluctant State and Its Enterprises: State-Owned Enterprises in the Netherlands in the “Long” Twentieth Century’. In The Rise and Fall of State-owned Enterprise in the Western World, ed. Pier A. Toninelli. Cambridge: Cambridge University Press, 253–72.

De Búrca, Gráinne, and Joanne Scott. 2001. ‘The Impact of the WTO on EU Decision-Making’. In The EU and the WTO: Legal and Constitutional Issues, eds. Gráinne De Búrca and Joanne Scott. Oxford: Hart, 1–30.

DeHart-Davis, Leisha. 2007. ‘The Unbureaucratic Personality’. Public Administration Review 67(5): 892–903.

Deitelhoff, Nicole, and Jens Steffek, eds. 2009. Was bleibt vom Staat? Demokratie, Recht und Verfassung im globalen Zeitalter [What Remains of the State? Democracy, Law and the Constitution in the Global Age]. Frankfurt am Main: Suhrkamp.

Démurger, Sylvie, Shi Li and Juan Yang. 2012. ‘Earnings Differentials between the Public and Private Sectors in China: Exploring Changes for Urban Local Residents in the 2000s’. China Economic Review 23(1): 138–53.

De Swaan, Abram. 1988. In Care of the State: Health Care, Education and Welfare in Europe and America. Cambridge: Polity Press.

Deutsches PISA-Konsortium, ed. 2003. Pisa 2000 – Ein differenzierter Blick auf die Länder der Bundesrepublik Deutschland [PISA 2000 – A Precise Look at the German Länder]. Opladen: Leske & Budrich.

de Vreese, Claes H. 2007. ‘The EU as a Public Sphere’. Living Reviews in European Governance 2(3): 5–22, http://europeangovernance.livingreviews.org/Articles/lreg-2007-3/ (last accessed 25 August 2014).

Dezalay, Yves, and Bryant G. Garth. 1996. Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order. Chicago: University of Chicago Press.

Dietz, Thomas. 2009. ‘Relationale Verträge und Reputationsnetzwerke im internation-alen Handel’ [Relational Contracts and Reputational Networks in International Trade]. Zeitschrift für Rechtssoziologie 30(2): 165–84.

——. 2010. Institutionen und Globalisierung: Eine empirische Untersuchung am Beispiel grenzüberschreitender Softwareentwicklungsverträge. Tübingen: Mohr Siebeck.

——. 2014. Global Order Beyond Law: How Information and Communication Technologies Facilitate Relational Contracting in International Trade. Oxford: Hart.

Bibliography 273

——, and Holger Nieswandt. 2009. ‘The Emergence of Transnational Cooperation in the Software Industry’. In Contractual Certainty in International Trade: Empirical Studies and Theoretical Debates on Institutional Support for Global Economic Exchanges, ed. Volkmar Gessner. Oxford: Hart, 87–105.

DiMaggio, Paul J., and Walter W. Powell. 1983. ‘The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields’. American Sociological Review 48(2): 147–60.

Dingeldey, Irene, and Heinz Rothgang, eds. 2009. Governance of Welfare State Reform: A Cross National and Cross Sectoral Comparison of Health, Pension, Labour Market and Educational Policies. Cheltenham: Edward Elgar.

Dingwerth, Klaus. 2007. The New Transnationalism: Transnational Governance and Democratic Legitimacy. Basingstoke: Palgrave Macmillan.

——, and Philipp Pattberg. 2010. ‘How Global and Why Governance? Ambivalences, Blind Spots, and Challenges for a Critical Global Governance Literature’. International Studies Review 12(4): 702–10.

Disney, Richard, and Amanda Gosling. 1998. ‘Does It Pay to Work in the Public Sector?’ Fiscal Studies 19(4): 347–74.

Dixit, Avinash K. 2004. Lawlessness and Economics: Alternative Modes of Governance. Princeton: Princeton University Press.

Dobler, Philipp. 2008. ‘Legitimation und Grenzen der Rechtsfortbildung durch den EuGH’ [Legitimation and the Limits of the ECJ’s Interpretation of the Law]. In Der EuGH und die Souveränität der Mitgliedstaaten: Eine kritische Analyse richterlicher Rechtsschöpfung auf ausgewählten Rechtsgebieten, eds. Günter H. Roth and Peter Hilpold. Bern: Stämpfli, 509–59.

Downs, George W., David M. Rocke and Peter N. Barsoom. 1996. ‘Is the Good News about Compliance Good News about Cooperation?’ International Organization 50(3): 379–406.

Drahozal, Christopher R. 2009. ‘Business Courts and the Future of Arbitration’. Cardozo Journal of Conflict Resolution 10(2): 491–507.

Dreher, Axel, Noel Gaston and Pim Martens. 2008. Measuring Globalisation: Gauging Its Consequences. New York: Springer.

D’Souza, Juliet, William Megginson and Robert Nash. 2005. ‘Effect of Institutional and Firm-specific Characteristics on Post-privatization Performance: Evidence from Developed Countries’. Journal of Corporate Finance 11(5): 747–66.

Dunning, John H., and Sarianna M. Lundan. 2008. Multinational Enterprises and the Global Economy. Cheltenham: Edward Elgar.

Dustmann, Christian, and Arthur van Soest. 1997. ‘Wage Structures in the Private and Public Sectors in West Germany’. Fiscal Studies 18(3): 225–47.

——, and ——. 1998. ‘Public and Private Sector Wages of Male Workers in Germany’. European Economic Review 42(8): 1417–41.

Easton, David. 1965. A Systems Analysis of Political Life. New York: Wiley.——. 1975. ‘A Re-assessment of the Concept of Political Support’. British Journal of

Political Science 5(4): 435–57.Eden, Lorraine. 2001. ‘Transfer Pricing, Intrafirm Trade and the BLS International Price

Program’, Washington, DC: US Department of Labor (BLS Working Paper 334/01), http://www.bls.gov/osmr/pdf/ec010020.pdf (last accessed 25 August 2014).

Edwards, Corwin D. 1949. Maintaining Competition: Requisites of a Governmental Policy. New York: McGraw-Hill.

——. 1980 (1956). Big Business and the Policy of Competition. Westport: Greenwood Press.

274 Bibliography

Ehlermann, Claus-Dieter. 2002a. ‘Six Years on the Bench of the “World Trade Court”: Some Personal Experiences as Member of the Appellate Body of the World Trade Organization’. Journal of World Trade 36(4): 605–39.

——. 2002b. ‘Tensions between the Dispute Settlement Process and the Diplomatic and Treaty-Making Activities of the WTO’. World Trade Review 1(3): 301–8.

——. 2003. ‘Reflections on the Appellate Body of the WTO’. Journal of International Economic Law 6(3): 695–708.

Eilders, Christiane, and Katrin Voltmer. 2003. ‘Zwischen Deutschland und Europa: Eine empirische Untersuchung zum Grad von Europäisierung und Europa-Unterstützung der meinungsführenden deutschen Tageszeitungen’ [Between Germany and Europe: An Empirical Study on the Degree of Europeanization and Support for Europe in the Leading German Daily Newspapers]. Medien & Kommunikationswissenschaft 51(2): 250–70.

Ellickson, Robert C. 1991. Order Without Law: How Neighbors Settle Disputes. Cambridge, MA: Harvard University Press.

Elster, Jon. 1989. Nuts and Bolts for the Social Sciences. Cambridge: Cambridge University Press.

Enthoven, Alain C. 1988. Theory and Practice of Managed Competition in Health Care Finance. Amsterdam: North Holland.

Ertl, Hubert. 2006. ‘Educational Standards and the Changing Discourse on Education: The Reception and Consequences of the PISA Study in Germany’. Oxford Review of Education 32(5): 619–34.

——, and David Phillips. 2000. ‘The Enduring Nature of the Tripartite System of Secondary Schooling in Germany: Some Explanations’. British Journal of Educational Studies 48(4): 391–412.

Esping-Andersen, Gøsta. 1990. The Three Worlds of Welfare Capitalism. Cambridge: Polity Press.

Eurydice and CEDEFOP. 1999. ‘Structures of Education, Vocational Training and Adult Education Systems in Europe: United Kingdom 1999. England and Wales, Northern Ireland, Scotland’, http://www.see-educoop.net/education_in/pdf/royaume-uni-en-misc-t05.pdf (last accessed 25 August 2014).

Evans, Peter B. 1995. Embedded Autonomy: States and Industrial Transformation. Princeton: Princeton University Press.

——. 1997. ‘The Eclipse of the State. Reflections on Stateness in an Era Globalization’. World Politics 50(1): 62–87.

——, Dietrich Rueschemeyer and Theda Skocpol, eds. 1985. Bringing the State Back In. Cambridge: Cambridge University Press.

Fargion, Valeria. 2006. ‘Changes in the Responsibilities and Financing of the Health System in Italy’. Revue française des affaires sociales 60(2–3): 285–312.

Ferree, Myra M., William A. Gamson, Jürgen Gerhards and Dieter Rucht. 2002. ‘Four Models of the Public Sphere in Modern Democracies’. Theory and Society 31(3): 289–324.

Finnemore, Martha. 1993. ‘International Organizations as Teachers of Norms: The United Nations Educational, Scientific, and Cultural Organization and Science Policy’. International Organization 47(4): 565–97.

——. 1996. National Interests in International Society. Ithaca: Cornell University Press.——, and Kathryn Sikkink. 2001. ‘TAKING STOCK: The Constructivist Research

Program in International Relations and Comparative Politics’. Annual Review of Political Science 4: 391–416.

Fischer-Lescano, Andreas. 2010. ‘Europäische Rechtspolitik als transnationale Verfassungspolitik. Soziale Demokratie in der transnationalen Konstellation’

Bibliography 275

[European Legal Policy as Transnational Constitutional Policy. Social Democracy in the Transnational Constellation]. In Strukturfragen der Europäischen Union, eds. Claudio Franzius, Franz C. Mayer and Jürgen Neyer. Baden-Baden: Nomos, 307–24.

——, and Gunther Teubner. 2004. ‘Regime-Collisions: The Vain Search for Legal Unity in the Fragmentation of Global Law’. Michigan Journal of International Law 25(4): 999–1046.

Fligstein, Neil. 2008. Euro-Clash: The EU, European Identity, and the Future of Europe. Oxford: Oxford University Press.

Føllesdal, Andreas, and Simon Hix. 2006. ‘Why There is a Democratic Deficit in the EU: A Response to Majone and Moravcsik’. Journal of Common Market Studies 44(3): 533–62.

Fon, Vincy, Francesco Parisi and Ben Depoorter. 2005. ‘Litigation, Judicial Path-Dependence, and Legal Change’. European Journal of Law and Economics 20(1): 43–56.

Forsthoff, Ernst. 1938. Die Verwaltung als Leistungsträger [The Administration as a Provider of Services]. Stuttgart: Kohlhammer.

France, George. 1994. ‘Concorrenza e servizi sanitari: atti preparatori dell’incontro di studio’ [Competition and Health Services: Preliminaries for the Project Meeting]. Rome: Istituto di Studi sulle Regioni (Quaderni per la ricerca, Serie studi 33).

——. 2009. ‘Italy’s New Fiscal Federalism’. Eurohealth 15(2): 18–19.Friedrichs, Jörg. 2007. Fighting Terrorism and Drugs: Europe and International Police

Cooperation. London: Routledge.Frisina, Lorraine. 2008. ‘Policy Values and Policy Change in Different Healthcare

Systems: A Comparative Analysis of the British NHS and the U.S. Private Insurance System’. Harvard Health Policy Review 9(1): 88–99.

——, and Ralf Götze. 2011. ‘Health Care Policy for Better or for Worse? Examining NHS Reforms during Times of Economic Crisis versus Relative Stability’. Social Policy and Administration 45(4): 488–505.

Frogner, Bianca K., Peter S. Hussey and Gerrard F. Andersson. 2011. ‘Health Systems in Industrialized Countries’. In The Oxford Handbook of Health Economics, eds. Sherry Glied and Peter C. Smith. Oxford: Oxford University Press, 8–29.

Fukuyama, Francis. 1992. The End of History and the Last Man. New York: Free Press.Galambos, Louis. 2000. ‘State-owned Enterprises in a Hostile Environment. The U.S.

Experience’. In The Rise and Fall of State-owned Enterprise in the Western World, ed. Pier A. Toninelli. Cambridge: Cambridge University Press, 273–302.

Ganghof, Steffen, and Philipp Genschel. 2008. ‘Deregulierte Steuerpolitik: Körperschaftswettbewerb und Einkommensbesteuerung in Europa’ [Deregulated Tax Policy: Competition among Public Authorities and Income Taxes in Europe]. In Politische Ökonomie der Europäischen Integration, eds. Martin Höpner and Armin Schäfer. Frankfurt am Main: Campus, 311–33.

García Canclini, Néstor. 2001. Consumers and Citizens: Globalization and Multicultural Conflicts. Minneapolis: University of Minnesota Press.

Garfinkel, Harold. 1967. Studies in Ethnomethodology. Englewood Cliffs: Prentice Hall.Garrett, Geoffrey, and Christopher Way. 1999. ‘Public Sector Unions, Corporatism,

and Macroeconomic Performance’. Comparative Political Studies 32(4): 411–34.Gartzke, Erik, and Megumi Naoi. 2011. ‘Multilateralism and Democracy: A Dissent

Regarding Keohane, Macedo, and Moravcsik’. International Organization 65(3): 589–98.

Genschel, Philipp. 2004. ‘Globalization and the Welfare State. A Retrospective’. Journal of European Public Policy 11(4): 613–36.

276 Bibliography

——, and Markus Jachtenfuchs. 2009. ‘The Fiscal Anatomy of a Regulatory Polity: Tax Policy and Multilevel Governance in the EU’. Berlin: Hertie School of Governance (Working Paper 43).

——, and ——. 2011. ‘How the European Union Constrains the State: Multilevel Governance of Taxation’. European Journal of Political Research 50(3): 293–314.

——, and ——, eds. 2013. Beyond the Regulatory Polity? The European Integration of Core State Powers. Oxford: Oxford University Press.

——, and Bernhard Zangl. 2008. ‘Metamorphosen des Staates: Vom Herr-schaftsmonopolisten zum Herrschaftsmanager’ [Metamorphoses of the State: From Monopolist to Manager of Political Authority]. Leviathan 36(3): 430–54.

——, and ——. 2014. ‘State Transformations in OECD Countries’. Annual Review of Political Science 17: 337–54.

Gerhards, Jürgen. 2001. ‘Missing a European Public Sphere’. In Will Europe Work? Integration, Employment and the Social Order, eds. Martin Kohli and Mojca Novak. London: Routledge, 145–58.

Gerhardt, Michael J. 2005. ‘The Limited Path Dependency of Precedent’. Journal of Constitutional Law 7(4): 903–1000.

Gerlinger, Thomas. 2010. ‘Health Care Reform in Germany’. German Policy Studies 6(1): 107–42.

Ghinetti, Paolo, and Claudio Lucifora. 2008. ‘Public Sector Pay Gaps and Skill Levels: A Cross-Country Comparison’. Vercelli: University of Eastern Piedmont, Faculty of Economics (SEMEQ Department Working Paper 118).

Giaimo, Susan. 2002. Markets and Medicine: The Politics of Health Care Reform in Britain, Germany, and the United States. Ann Arbor: University of Michigan Press.

——, and Philip Manow. 1999. ‘Adapting the Welfare State: The Case of Health Care Reform in Britain, Germany, and the United States’. Comparative Political Studies 32(8): 967–1000.

Gilardi, Fabrizio. 2012. ‘Transnational Diffusion: Norms, Ideas, and Policies’. In Handbook of International Relations, eds. Walter Carlsnaes, Thomas Risse and Beth Simmons. Thousand Oaks: Sage, 453–77.

Gilbert, Neil. 2002. Transformation of the Welfare State: The Silent Surrender of Public Responsibility. Oxford: Oxford University Press.

——, and Barbara Gilbert. 1989. The Enabling State: Modern Welfare Capitalism in America. Oxford: Oxford University Press.

Gilroy, Bernard M. 1989. ‘Intra-Firm Trade’. Journal of Economic Surveys 3(4): 325–43.Giordano, Raffaela, Domenico Depalo, Manuel Coutinho Pereira, Bruno Eugène,

Evangelia Papapetrou, Javier J. Perez, Lukas Reiss and Mojca Roter. 2011. ‘The Public Sector Pay Gap in a Selection of Euro Area Countries’. Frankfurt am Main: European Central Bank (Working Paper 1406).

Glaser, Barney G., and Anselm L. Strauss. 1967. The Discovery of Grounded Theory: Strategies for Qualitative Research. Chicago: Aldine.

Goldstein, Judith, Miles Kahler, Robert O. Keohane and Anne-Marie Slaughter. 2000. ‘Introduction: Legalization and World Politics’. International Organization 54(3): 385–99.

——, and Robert O. Keohane. 1993. ‘Ideas and Foreign Policy: An Analytical Framework’. In Ideas and Foreign Policy: Beliefs, Institutions, and Political Change, eds. Judith Goldstein and Robert O. Keohane. Ithaca: Cornell University Press, 3–30.

Goncharov, Igor, Jörg R. Werner and Jochen Zimmermann. 2009. ‘Legislative Demands and Economic Realities: Company and Group Accounts Compared’. International Journal of Accounting 44(4): 334–62.

Bibliography 277

Gornick, Janet, and Jerry Jacobs. 1998. ‘Gender, the Welfare State, and Public Employment: A Comparative Study of Seven Industrialized Countries’. American Sociological Review 63(5): 688–710.

Gosling, Amanda, and Thomas Lemieux. 2004. ‘Labor Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States’. In Seeking a Premier Economy: The Economic Effects of British Economic Reforms 1980–2000, eds. David Card, Richard Blundell and Richard B. Freeman. Chicago: University of Chicago Press, 275–312.

Gottschall, Karin. 2009. ‘Der Staat und seine Diener: Metamorphosen eines wohlfahrtsstaatlichen Beschäftigungsmodells’ [The State and Its Servants: Metamorphoses of a Welfare State Employment Model]. In Wohlfahrtstaatlichkeit in entwickelten Demokratien: Herausforderungen, Reformen und Perspektiven, eds. Herbert Obinger and Elmar Rieger. Frankfurt am Main: Campus, 461–91.

Götze, Ralf, Mirella Cacace and Heinz Rothgang. 2009. ‘Von der Risiko- zur Anbieterselektion: Eigendynamiken wettbewerblicher Reformen in Gesundheits-systemen des Sozialversicherungstyps’ [From Risk Selection to Provider Selection: Dynamics of Competition-Oriented Reforms of Health Insurance Systems of the Social Insurance Type]. Zeitschrift für Sozialreform 55(2): 149–75.

Gowland, David, Arthur Turner and Alex Wright. 2010. Britain and European Integration since 1945: On the Sidelines. London: Routledge.

Graham, Cosmo. 2000. Regulating Public Utilities: A Constitutional Approach. Oxford: Oxford University Press.

Gravel, Eric, Isabelle Duplessis and Bernard Gernigon. 2001. The Committee on Freedom of Association: Its Impact over 50 Years. Geneva: International Labour Office.

Green, Donald P., and Ian Shapiro. 1994. Pathologies of Rational Choice Theory: A Critique of Applications in Political Science. New Haven: Yale University Press.

Greer, Scott L. 2006. ‘Uninvited Europeanization: Neofunctionalism and the EU in Health Policy’. Journal of European Public Policy 13(1): 134–52.

Greif, Avner. 1989a. ‘The Organization of Long-distance Trade: Reputation and Coalitions in the Geniza Documents and Genoa during the Eleventh and the Twelfth Centuries’. Journal of Economic History 51(2): 459–62.

——. 1989b. ‘Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders’. Journal of Economic History 49(4): 857–82.

——. 2000. ‘The Fundamental Problem of Exchange: A Research Agenda in Historical Institutional Analysis’. European Review of Economic History 4(3): 251–84.

——. 2006. Institutions and the Path to Modern Economy: Lessons from Medieval Trade. Cambridge: Cambridge University Press.

Grek, Sotiria. 2008. ‘PISA in the British Media: Leaning Tower or Robust Testing Tool’. CES Briefing 45, http://www.ces.ed.ac.uk/PDF%20Files/Brief045.pdf (last accessed 25 August 2014).

Greß, Stefan, Axel Focke, Franz Hessel and Jürgen Wasem. 2006. ‘Financial Incentives for Disease Management Programmes and Integrated Care in German Social Health Insurance’. Health Policy 78(2): 295–305.

Groothues, Fritz. 2004. ‘Television News and the European Public Sphere. A Preliminary Investigation’. Bristol: Centre for European Political Communication (Working Paper 06/04).

Großmann-Doerth, Hans. 1930. Das Recht des Überseekaufs [The Law of Maritime Sales Contracts], vol. 1. Mannheim: Bensheimer.

Gruber, Karl Heinz. 2006. ‘The German “PISA-Schock”: Some Aspects of the Extraordinary Impact of the OECD’s PISA Study on the German Education System’.

278 Bibliography

In Cross-national Attraction in Education: Accounts from England and Germany, ed. Hubert Ertl. Oxford: Symposium Books, 195–208.

Grundmann, Stefan, and Florian Möslein. 2003. ‘Die goldene Aktie: Staatskontrollrechte in Europarecht und wirtschaftspolitischer Bewertung’ [The Golden Share: An Economic Policy Evaluation of State Control in European Law]. Zeitschrift für Unternehmens- und Gesellschaftsrecht 32(3): 317–66.

Guéhenno, Jean-Marie. 1995. The End of the Nation-State. Minneapolis: University of Minnesota Press.

Gujarati, Damodar. 2003. Basic Econometrics. New York: McGraw-Hill.Guzman, Andrew T. 2002a. ‘A Compliance-Based Theory of International Law’.

California Law Review 90(6): 1823–87.——. 2002b. ‘The Cost of Credibility: Explaining Resistance to Interstate Dispute

Resolution Mechanisms’. Journal of Legal Studies 31(2): 303–26.——. 2005. ‘The Design of International Agreements’. European Journal of International

Law 16(4): 579–612.Habermas, Jürgen. 1973. Legitimation Crisis. Boston: Beacon Press.——. 1989. The Structural Transformation of the Public Sphere: An Inquiry into a Category

of Bourgeois Society. Cambridge, MA: MIT Press.——. 2001. The Postnational Constellation: Political Essays. Cambridge, MA: MIT Press.——. 2009a. Europe: The Faltering Project. Oxford: Polity Press.——. 2009b. ‘Political Communication in Media Society – Does Democracy Still Have

an Epistemic Dimension? The Impact of Normative Theory on Empirical Research’. In Europe: The Faltering Project. Oxford: Polity Press, 138–83.

Hacker, Jacob S. 2004. ‘Dismantling the Health Care State? Political Institutions, Public Policies and the Comparative Politics of Health Care Reform’. British Journal of Political Science 34(4): 693–724.

——. 2010. ‘The Road to Somewhere: Why Health Reform Happened or Why Political Scientists Who Write about Public Policy Shouldn’t Assume They Know How to Shape It’. Perspectives on Politics 8(3): 861–76.

Hackethal, Andreas, Reinhard H. Schmidt and Marcel Tyrell. 2006. ‘The Transformation of the German Financial System’. Revue d’économie politique 117(4): 433–56.

Hadfield, Gillian K. 2008. ‘The Many Legal Institutions that Support Contractual Commitments’. In Handbook of New Institutional Economics, eds. Claude Ménard and Mary M. Shirley. Berlin: Springer, 175–203.

Hadorn, David C., ed. 1992. Basic Benefits and Clinical Guidelines: The Oregon Priority Setting Process. Boulder: Westview Press.

Hail, Luzi, and Christian Leuz. 2006. ‘International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?’ Journal of Accounting Research 44(3): 485–531.

Halberstam, Daniel. 2008. ‘Comparative Federalism and the Role of the Judiciary’. In The Oxford Handbook of Law and Politics, eds. Keith E. Whittington, Daniel R. Kelemen and Gregory A. Caldeira. Oxford: Oxford University Press, 142–64.

Hall, David, ed. 1997. Restructuring and Privatisation in the Public Utilities – Europe. Geneva: ILO.

Hall, Peter A. 1989. The Political Power of Economic Ideas: Keynesianism Across Nations. Princeton: Princeton University Press.

——. 1993. ‘Policy Paradigms, Social Learning, and the State. The Case of Economic Policymaking in Britain’. Comparative Politics 25(3): 275–96.

——, and David Soskice, eds. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press.

Bibliography 279

——, and Rosemary C.R. Taylor. 1996. ‘Political Science and the Three New Institutionalisms’. Political Studies 44(5): 936–57.

Hall, Stuart. 1997. ‘The Centrality of Culture: Notes on the Cultural Revolutions of Our Time’. In Media and Cultural Regulation, ed. Kenneth Thompson. London: Sage, 207–38.

Hallin, Daniel C., and Paolo Mancini. 2004. Comparing Media Systems: Three Models of Media and Politics. Cambridge: Cambridge University Press.

Haltern, Ulrich. 2005. ‘Das Janusgesicht der Unionsbürgerschaft’ [The Janus Face of European Union Citizenship]. Swiss Political Science Review 11(1): 87–117.

Ham, Christopher. 2009. Health Policy in Britain. Basingstoke: Palgrave Macmillan.Hammermeister, Jan-Hendrik. 2012. Der Einfluss von Rechts- und Finanzsystemen auf die

Ausgestaltung der Rechnungslegung [The Influence of Legal and Financial Systems on Accounting Formats]. Bremen: University of Bremen (doctoral thesis).

——, and Jochen Zimmermann. 2010. ‘Financial Reporting Demands in a Globalised World: The Harmonisation of Accounting Rules’. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 125).

——, and ——. 2011. ‘Die Rolle von Nationalstaaten auf OECD-Kapitalmärkten’ [The Role of Nation States in OECD Capital Markets]. In Wozu Staat: Governance in Räumen begrenzter und konsolidierter Staatlichkeit, eds. Marianne Beisheim, Tanja A. Börzel, Philipp Genschel and Bernhard Zangl. Baden-Baden: Nomos, 197–218.

Hannerz, Ulf. 2004. Foreign News: Exploring the World of Foreign Correspondents. Chicago: Chicago University Press.

Hao, Lingxin, and Daniel Q. Naiman. 2007. Quantile Regression. London: Sage.Hardy, Jonathan. 2008. Western Media Systems. London: Routledge.Haunss, Sebastian, and Steffen Schneider. 2013. ‘The Discursive Legitimation of

Political Regimes: A Network Perspective’. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 177).

Hay, Colin. 2011. ‘Ideas and the Construction of Interests’. In Ideas and Politics in Social Science Research, eds. Daniel Béland and Robert H. Cox. Oxford: Oxford University Press.

——, Michael Lister and David Marsh, eds. 2006. The State: Theories and Issues. Basingstoke: Palgrave Macmillan.

——, and Ben Rosamond. 2002. ‘Globalization, European Integration and the Discursive Construction of Economic Imperatives’. Journal of European Public Policy 9(2): 147–67.

Hays, Jude C., Sean D. Ehrlich and Clint Peinhardt. 2005. ‘Government Spending and Public Support for Trade in the OECD: An Empirical Test of the Embedded Liberalism Thesis’. International Organization 59(2): 473–94.

Haywood, Stuart, and Andy Alaszewski. 1980. Crisis in the Health Service. London: Croom Helm.

Healy, Paul M., and Krishna G. Palepu. 2003. ‘The Fall of Enron’. Journal of Economic Perspectives 17(2): 3–24.

Heikkilä, Heikki, and Risto Kunelius. 2006. ‘Journalists Imaging the European Public Sphere: Professional Discourses about the EU News Practices in the Countries’. Javnost/The Public 13(4): 63–80.

Heinze, Rolf G. 2009. Rückkehr des Staates? Politische Handlungsmöglichkeiten in unsi-cheren Zeiten [Return of the State? Political Action Capacities in Uncertain Times]. Wiesbaden: VS.

Held, David. 1995. Democracy and the Global Order: From the Modern State to Cosmopolitan Governance. Stanford: Stanford University Press.

280 Bibliography

——, Anthony McGrew, David Goldblatt and Jonathan Perraton. 1999. Global Transformations: Politics, Economics, and Culture. Stanford: Stanford University Press.

Helderman, Jan-Kees, Frederik T. Schut, Tom E.D. van der Grinten and Wynand P.M.M. van den Ven. 2005. ‘Market-Oriented Health Care Reforms and Policy Learning in the Netherlands’. Journal of Health Politics, Policy and Law 30(1–2): 189–209.

Helfer, Laurence R., and Anne-Marie Slaughter. 1997. ‘Toward a Theory of Effective Supranational Adjudication’. Yale Law Journal 107(2): 273–391.

——, and ——. 2005. ‘Why States Create International Tribunals: A Response to Professors Posner and Yoo’. California Law Review 93(3): 899–956.

Helleiner, Eric. 1994. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca: Cornell University Press.

——. 2014. Forgotten Foundations of Bretton Woods: International Development and the Making of the Post-War Order. Ithaca: Cornell University Press.

Heller, Peter, and Alan Tait. 1983. ‘Government Employment and Pay: Some International Comparisons’. Finance and Development 20(3): 44–7.

Helmedach, Achim. 2009. ‘Judizialisierungsprozesse im Handelsbereich: Streitbeilegung in GATT und WTO’ [Judicialization in Trade: Dispute Settlement under GATT and WTO]. In Auf dem Weg zu internationaler Rechtsherrschaft? Streitbeilegung zwischen Politik und Recht, ed. Bernhard Zangl. Frankfurt am Main: Campus, 71–118.

Hempel, Carl G., and Paul Oppenheim. 1948. ‘Studies in the Logic of Explanation’. Philosophy of Science 15(2): 135–75.

Henisz, Witold J. 2010. The Political Constraint Index (POLCON) Dataset, http://www-management.wharton.upenn.edu/henisz/ (last accessed 25 August 2014).

Hennart, Jean-François. 1982. A Theory of Multinational Enterprise. Ann Arbor: University of Michigan Press.

——. 2009. ‘Theories of the Multinational Enterprise’. In The Oxford Handbook of International Business, 2nd edition, ed. Alan M. Rugman. Oxford: Oxford University Press, 125–45.

Henningham, John, and Anthony Delano. 1998. ‘British Journalists’. In The Global Journalist: News People Around the World, ed. David H. Weaver. Cresskill: Hampton Press, 143–60.

Henry, Miriam, Bob Lingard, Fazal Rizvi and Sandra Taylor. 2001. The OECD, Globalisation and Education Policy. Bingley: Emerald Group Publishing.

Hepp, Andreas. 2009. ‘Transculturality as a Perspective. Researching Media Cultures Comparatively’. Forum Qualitative Social Research 10(1): Art. 26, http://nbn- resolving.de/urn:nbn:de:0114-fqs0901267 (last accessed 25 August 2014).

——. 2015. Transcultural Communication. Malden: Wiley-Blackwell.——, Michael Brüggemann, Katharina Kleinen-von Königslöw, Swantje Lingenberg

and Johanna Möller. 2012. Politische Diskurskulturen in Europa: Die Mehrfachseg-mentierung europäischer Öffentlichkeit [Cultures of Political Discourse in Europe: The Multiple Segmentation of the European Public Sphere]. Wiesbaden: VS.

——, and Hartmut Wessler. 2009. ‘Politische Diskurskulturen: Überlegungen zur empirischen Erklärung segmentierter europäischer Öffentlichkeit’ [Cultures of Political Discourse: Reflections on Empirical Explanations of the Segmented European Public Sphere]. Medien & Kommunikationswissenschaft 57(2): 174–97.

Herzog, Roman, and Lüder Gerken. 2008. ‘Comment: Stop the European Court of Justice’. Freiburg: Centre for European Policy, http://www.cep.eu/fileadmin/user_ upload/Pressemappe/CEP_in_den_Medien/Herzog-EuGH-Webseite_eng.pdf (last accessed 25 August 2014).

Heston, Alan, Robert Summers and Bettina Aten. 2012. Penn World Table Version 7.1. Philadelphia: University of Pennsylvania, Center for International Comparisons of

Bibliography 281

Production, Income and Prices, https://pwt.sas.upenn.edu/php_site/pwt_index.php (last accessed 25 August 2014).

Hils, Sylvia, and Sebastian Streb. 2010. ‘Vom Staatsdiener zum Dienstleister? Veränderungen öffentlicher Beschäftigungssysteme in Deutschland, Großbritannien, Frankreich und Schweden’ [From State Servant to Service Provider: Changes in the Public Employment Systems of Germany, the United Kingdom, France and Sweden]. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 111).

Hindelang, Steffen. 2009. The Free Movement of Capital and Foreign Direct Investment: The Scope of Protection in EU Law. Oxford: Oxford University Press.

Hoffmann, Hermann. 2010. ‘Schiedsgerichte als Gewinner der Globalisierung?’ [Courts of Arbitration as Winners of Globalization?]. Zeitschrift für Schiedsverfah-rensrecht: 96–101.

——. 2011. Kammern für internationale Handelssachen [Chambers for International Trade Cases]. Baden-Baden: Nomos.

——, and Andreas Maurer. 2010. ‘Entstaatlichung der Justiz. Empirische Belege zum Bedeutungsverlust staatlicher Gerichte für internationale Wirtschaftsstreitigkeiten’ [Privatization of Justice. Empirical Evidence for the Loss of Importance of State Courts in International Trade Conflicts]. Zeitschrift für Rechtssoziologie 31(2): 279–302.

Hooghe, Liesbet, and Gary Marks. 2009. ‘A Postfunctionalist Theory of European Integration: From Permissive Consensus to Constraining Dissensus’. British Journal of Political Science 39(1): 1–23.

Hopwood, Anthony G. 1994. ‘Some Reflections on the Harmonizing of Accounting within the EU’. European Accounting Review 3(2): 241–53.

Huber, Evelyne, Matthew Lange, Stephan Leibfried, Jonah D. Levy, Frank Nullmeier and John D. Stephens. 2015a. ‘Conclusion’. In The Oxford Handbook of Transfor-mations of the State, eds. Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah D. Levy, Frank Nullmeier and John D. Stephens. Oxford: Oxford University Press, 815–39.

——, ——, ——, ——, —— and ——. 2015b. ‘Introduction’. In The Oxford Handbook of Transformations of the State, eds. Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah D. Levy, Frank Nullmeier and John D. Stephens. Oxford: Oxford University Press, 1–32.

——, and John D. Stephens. 2001. Development and Crisis of the Welfare State: Parties and Policies in Global Markets. Chicago: University of Chicago Press.

Hunter, David J. 2013. ‘A Response to Rudolf Klein: A Battle May Have Been Won but Perhaps Not the War’. Journal of Health Politics, Policy and Law 38(4): 871–7.

Hunter, Grant. 2008. ‘Standard Forms – The BIMCO Experience’. In Legal Issues Relating to Time Charterparties, ed. Rhidian Thomas. London: Informa Law, 1–15.

Hurrelmann, Achim, Zuzana Krell-Laluhová, Frank Nullmeier, Steffen Schneider and Achim Wiesner. 2009. ‘Why the Democratic Nation-state is Still Legitimate: A Study of Media Discourses’. European Journal of Political Research 48(4): 483–515.

——, Stephan Leibfried, Kerstin Martens and Peter Mayer, eds. 2007. Transforming the Golden-Age Nation State. Basingstoke: Palgrave Macmillan.

——, Steffen Schneider and Jens Steffek, eds. 2007. Legitimacy in an Age of Global Politics. Basingstoke: Palgrave Macmillan.

IEA. 2000. ‘TIMSS 1999 International Mathematics Report’, http://timss.bc.edu/timss1999i/math_achievement_report.html (last accessed 25 August 2014).

Immergut, Ellen M. 1992. Health Politics: Interests and Institutions in Western Europe. Cambridge: Cambridge University Press.

282 Bibliography

Inglehart, Ronald. 1997. Modernization and Postmodernization: Cultural, Economic and Political Change in 43 Societies. Princeton: Princeton University Press.

Jachtenfuchs, Markus, and Philipp Genschel, eds. 2013. Beyond the Regulatory Polity? The European Integration of Core State Powers. Oxford: Oxford University Press.

Jäger, Alexander. 2004. ‘Der Zusammenhang von Staat und Infrastruktur und die Privatisierung von Infrastrukturen aus staatstheoretischer Perspektive’ [The Relationship between State and Infrastructure: Privatization in the Light of State Theory]. In Der Staat auf dem Rückzug, eds. Volker Schneider and Marc Tenbücken, Frankfurt am Main: Campus, 29–52.

Jahn, Detlef. 2003. ‘Das politische System Schwedens’ [Sweden’s Political System]. In Die politischen Systeme Westeuropas, 3rd edition, ed. Wolfgang Ismayr. Wiesbaden: VS, 93–130.

Jakobi, Anja P., and Kerstin Martens. 2007. ‘Diffusion durch internationale Organi-sationen: Die Bildungspolitik der OECD’ [Diffusion by International Organizations: The OECD’s Education Policy]. In Transfer, Diffusion und Konvergenz von Politiken, eds. Kerstin Holzinger, Helge Jörgens and Christoph Knill. Wiesbaden: VS, 247–70.

Jann, Ben. 2006. JMPIERCE: Stata Module to Perform Juhn-Murphy-Pierce Decomposition, http://ideas.repec.org/c/boc/bocode/s448803.html#cites (last accessed 25 August 2014).

——. 2008. ‘The Blinder-Oaxaca Decomposition for Linear Regression Models’. Stata Journal 8(4): 453–79.

Jayaraman, Narayanan, Kuldeep Shastri and Kishore Tandon. 1993. ‘The Impact of International Cross Listings on Risk and Return’. Journal of Banking and Finance 17(1): 91–103.

Jellinek, Georg. 1966 (1900). Allgemeine Staatslehre [A General Legal Theory of the State]. Bad Homburg vor der Höhe: Gehlen.

Jessop, Bob. 2002. The Future of the Capitalist State. Cambridge: Cambridge University Press.

——. 2009. State Power: A Strategic-Relational Approach. Cambridge: Polity Press.Joerges, Christian, and Poul F. Kjær. 2011. ‘A New Type of Conflicts Law as

Constitutional Form in the Postnational Constellation’. Transnational Legal Theory 2(2): 153–65.

——, and Florian Rödl. 2009. ‘Informal Politics, Formalised Law and the “Social Deficit” of European Integration: Reflections after the Judgments of the ECJ in Viking and Laval’. European Law Journal 15(1): 1–19.

John, Peter C. 1989. Recent Trends in Central-Local Government Relations. London: Joseph Rowntree Foundation.

Juhn, Chinhui, Kevin Murphy and Brooks Pierce. 1993. ‘Wage Inequality and the Rise in Returns to Skill’. Journal of Political Economy 101(3): 410–42.

Kahler, Miles, and David A. Lake, eds. 2009. Governance in a Global Economy: Political Authority in Transition. Princeton: Princeton University Press.

——, and ——, eds. 2013. Politics in the New Hard Times: The Great Recession in Comparative Perspective. Ithaca: Cornell University Press.

Kaiser Family Foundation. 2013. The Impact of the Coverage Gap in States not Expanding Medicaid by Race and Ethnicity: Issue Brief December 2013. Washington, DC: Henry J. Kaiser Family Foundation, http://kff.org/disparities-policy/issue-brief/the-impact-of-the-coverage-gap-in-states-not-expanding-medicaid-by-race-and-ethnicity/ (last accessed 25 August 2014).

Kaiser, Karl. 1971. ‘Transnational Relations as a Threat to the Democratic Process’. International Organization 25(3): 706–20.

Bibliography 283

Kantner, Cathleen. 2004. Kein modernes Babel: Kommunikative Voraussetzungen europäis-cher Öffentlichkeit [No Modern Babylon: Communicative Prerequisites for a European Public Sphere]. Wiesbaden: VS.

——. 2006. ‘Collective Identity as Shared Ethical Self-Understanding: The Case of the Emerging European Identity’. European Journal of Social Theory 9(4): 501–23.

Katz, Michael L., and Carl Shapiro. 1985. ‘Network Externalities, Competition, and Compatibility’. American Economic Review 75(3): 424–40.

Katzenstein, Peter J. 1985. Small States in World Markets: Industrial Policy in Europe. Ithaca: Cornell University Press.

——, ed. 1997. Tamed Power: Germany in Europe. Ithaca: Cornell University Press.——. 2003. ‘Small States and Small States Revisited’. New Political Economy 8(1): 9–30.Katz Olson, Laura. 2010. The Politics of Medicaid. New York: Columbia University Press.Kelemen, R. Daniel. 2001. ‘The Limits of Judicial Power: Trade-Environment Disputes

in the GATT/WTO and the EU’. Comparative Political Studies 34(6): 622–50.——. 2006. ‘Suing for Europe: Adversarial Legalism and European Governance’.

Comparative Political Studies 39(1): 101–27.Kelly, Albert Victor. 2004. The Curriculum: Theory and Practice. London: Sage.Keohane, Robert O. 1984. After Hegemony: Cooperation and Discord in the World Political

Economy. Princeton: Princeton University Press.——, Stephen Macedo and Andrew Moravcsik. 2009. ‘Democracy-Enhancing

Multilateralism’. International Organization 63(1): 1–31.——, and Helen V. Milner, eds. 1996. Internationalization and Domestic Politics.

Cambridge: Cambridge University Press.——, Andrew Moravcsik and Anne-Marie Slaughter. 2000. ‘Legalized Dispute

Resolution: Interstate and Transnational’. International Organization 54(3): 457–88.——, and Joseph S. Nye. 1977. Power and Interdependence: World Politics in Transition.

Boston: Little, Brown.Kevin, Deirdre. 2003. Europe in the Media: A Comparison of Reporting, Representation, and

Rhetoric in National Media Systems in Europe. London: Lawrence Erlbaum.Kiemel, Wolfgang. 2003. ‘Freier Kapital- und Zahlungsverkehr’ [The Free Movement of

Capital and Foreign Direct Payments]. In Kommentar zum Vertrag über die Europäische Union und Vertrag zur Gründung der Europäischen Gemeinschaft, eds. Hans von der Groeben and Jürgen Schwarze. Baden-Baden: Nomos, Arts. 56–60 EC.

Kilian, Jan-Philipp. 2011. Rechnungslegung als Instrument des Gläubigerschutzes: Stabilität und Wandel im internationalen Vergleich [Accounting as an Instrument of Creditor Protection: An International Comparison of Stability and Change]. Frankfurt am Main: Peter Lang.

King, Gary, Robert O. Keohane and Sidney Verba. 1994. Designing Social Inquiry: Scientific Inference in Qualitative Research. Princeton: Princeton University Press.

Kittel, Bernhard, and Hannes Winner. 2005. ‘How Reliable is Pooled Analysis in Political Economy? The Globalization-Welfare State Nexus Revisited’. European Journal of Political Research 44(2): 269–93.

Klau, Arne Ragnar. 1995. Firmeninterner Handel: Eine theoretische und empirische Analyse des unternehmensinternen Außenhandels multinationaler Unternehmen [Intra-Company Trade: A Theoretical and Empirical Analysis of the Intra-Company Foreign Trade of Multinational Companies]. Berlin: Verlag für Wissenschaft und Forschung.

Klein, Rudolf. 2013. ‘The Twenty-Year War over England’s National Health Service: A Report from the Battlefield’. Journal of Health Politics Policy and Law 38(4): 849–69.

Kleinen-von Königslöw, Katharina. 2010. ‘Europe for the People? The Europeanization of Public Spheres in the Tabloid Press’. In Europe on Trial: Shortcomings of the EU with

284 Bibliography

Regard to Democracy, Public Sphere and Identity, eds. David Tréfás and Jens Lucht. Innsbruck: Studienverlag, 44–60.

Klitgaard, Michael B. 2010. ‘Veto Points and the Politics of Introducing Vouchers in the US and Sweden’. In Education in Political Science: Discovering a Neglected Field, eds. Anja P. Jakobi, Kerstin Martens and Klaus D. Wolf. London: Routledge, 23–37.

KMK/BMBF. 2008. ‘Ergebnisse von PIRLS/IGLU 2006-I und PISA 2006-I: Gemeinsame Empfehlungen der Kultusministerkonferenz und des Bundesministeriums für Bildung und Forschung’ [Results from PIRLS/IGLU 2006-I and PISA 2006-I: Recommendations of the Conference of Länder Education Ministers and of the Federal Ministry for Education and Research]. Berlin: BMBF, http://www.kmk.org/fileadmin/veroeffentlichungen_beschluesse/2008/2008_03_06-PISA-PIRLS-IGLU-2006-1.pdf (last accessed 25 August 2014).

Knoblauch, Hubert. 2013. ‘Communicative Constructivism and Mediatization’. Communication Theory 23(3): 297–315.

Knodel, Philipp, Kerstin Martens and Dennis Niemann. 2013. ‘PISA as an Ideational Road Map for Policy Change: Exploring Germany and England in a Comparative Perspective’. Globalisation, Societies and Education 11(3): 421–41.

——, and Heiko Walkenhorst. 2010. ‘What’s England Got to Do with It? British Underestimation of International Initiatives in Education Policy’. In Transformation of Education Policy, eds. Kerstin Martens, Alexander-Kenneth Nagel, Michael Windzio and Ansgar Weymann. Basingstoke: Palgrave Macmillan, 132–52.

Knutilla, Murray, and Wendee Kubik. 2001. State Theories: Classical, Global and Feminist Perspectives. London: Zed Books.

Koenker, Roger, and Gilbert Bassett. 1978. ‘Regression Quantiles’. Econometrica 46(1): 33–50.

Köndgen, Johannes. 2006. ‘Private Governance zwischen Deregulierung und Rekonsti-tutionalisierung’ [Private Governance between Deregulation and Reconstitution-alization]. Archiv für die civilistische Praxis 206: 477–525.

Konradi, Wioletta. 2009. ‘The Role of Lex Mercatoria in Supporting Globalised Transactions: An Empirical Insight into the Governance Structure of the Timber Industry’. In Contractual Certainty in International Trade – Empirical Studies and Theoretical Debates on Institutional Support for Global Economic Exchanges, ed. Volkmar Gessner. Oxford: Hart, 49–86.

Koopmans, Ruud, and Paul Statham. 2010. The Making of a European Public Sphere: Media Discourse and Political Contention. Cambridge: Cambridge University Press.

Koremenos, Barbara. 2007. ‘If Only Half of International Agreements Have Dispute Resolution Provisions, Which Half Needs Explaining?’ Journal of Legal Studies 36(1): 189–212.

——. 2008. ‘When, What, and Why do States Choose to Delegate?’ Law and Contemporary Problems 71(1): 151–92.

Krasner, Stephen D. 2003. ‘The State is Alive and Well’. In International Politics: Enduring Concepts and Contemporary Issues, eds. Robert J. Art and Robert Jervis. New York: Longman, 551–6.

Kriesi, Hanspeter, Edgar Grande, Romain Lachat, Martin Dolezal, Simon Bornschier and Timotheos Frey. 2008. West European Politics in the Age of Globalization. Cambridge: Cambridge University Press.

——, and Alexander H. Trechsel. 2008. The Politics of Switzerland: Continuity and Change in a Consensus Democracy. Cambridge: Cambridge University Press.

Krippendorff, Klaus. 2004. Content Analysis: An Introduction to Its Methodology. Thousand Oaks: Sage.

Bibliography 285

Kronke, Herbert. 2001. ‘Ziele – Methoden, Kosten – Nutzen: Perspektiven der Privatrechtsharmonisierung nach 75 Jahren UNIDROIT’ [Goals – Methods, Costs – Benefits: Perspectives on the Harmonisation of Private Law after 75 Years of UNIDROIT]. Juristenzeitung 56(23): 1149–57.

Kroos, Daniela, and Karin Gottschall. 2012. ‘Dualization and Gender in Social Services – The Role of the State in Germany and France’. In The Age of Dualization: The Changing Face of Inequality in Deindustrializing Societies, eds. Patrick Emmenegger, Silja Häusermann, Bruno Palier and Martin Seeleib-Kaiser. Oxford: Oxford University Press, 100–23.

——, Sebastian Streb and Sylvia Hils. 2011. ‘Public Employment between Markets and Institutions. Competition and Its Impact on Public Personnel Policies’. Industrielle Beziehungen 18(1–2): 39–59.

Krugman, Paul. 1987. ‘The Narrow Moving Band, the Dutch Disease, and the Competitive Consequences of Mrs. Thatcher: Notes on Trade in the Presence of Dynamic Scale Economies’. Journal of Development Economics 27: 41–55.

Kruse, Jörn. 1997. ‘Vertikale Integration als Wettbewerbsproblem’ [Vertical Integration as a Problem of Competition]. In Wettbewerbspolitik im Spannungsfeld nationaler und internationaler Kartellrechtsordnungen: Festschrift für Ingo Schmidt zum 65. Geburtstag, eds. Jörn Kruse, Kurt Stockmann and Lothar Vollmer. Baden-Baden: Nomos, 247–70.

Lane, Jan-Erik. 2005. Public Administration and Public Management: The Principal-Agent Perspective. London: Routledge.

La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer and Robert W. Vishny. 1997. ‘Legal Determinants of External Finance’. Journal of Finance 52(3): 1131–50.

Latour, Bruno. 2007. Reassembling the Social: An Introduction to Actor-Network-Theory. Oxford: Oxford University Press.

LeGrand, Julian, Nicholas Mays and Jo-Ann Mulligan. 1998. Learning from the NHS Internal Market: A Review of the Evidence. London: King’s Fund.

Leiber, Simone, Stefan Greß and Stephanie Heinemann. 2014. ‘Explaining Different Paths in Social Health Insurance Countries – Health System Change and Cross-border Lesson-drawing between Germany, Austria and the Netherlands’. Social Policy and Administration, online early view at http://onlinelibrary.wiley.com/doi/10.1111/spol.12078/abstract (last accessed 25 August 2014).

Leibfried, Stephan. 2000. ‘National Welfare States, European Integration and Globalization: A Perspective for the Next Century’. Social Policy and Administration 34(1): 44–63.

——. 2001. ‘Von der Hinfälligkeit des Staates der Daseinsvorsorge. Thesen zur Zerstörung des äußeren Verteidigungsrings des Sozialstaates’ [The Lapsing of the Public Services State. Some Theses on the Destruction of the External Defense Wall of the Welfare State]. In Die Zukunft der Daseinsvorsorge: Öffentliche Unternehmen im Wettbewerb, ed. Schader-Stiftung. Darmstadt: Schader-Stiftung, 158–66.

——. 2008. ‘Rückkehr des Staates?’ [A Return of the State?]. Blätter für deutsche und internationale Politik 53(5): 79–85.

——. 2015. ‘Social Policy: Left to the Judges and the Markets?’ In Policy-Making in the European Union, 7th edition, eds. Helen Wallace, Mark A. Pollack and Alasdair R. Young. Oxford: Oxford University Press.

——, Evelyne Huber, Matthew Lange, Jonah D. Levy, Frank Nullmeier and John D. Stevens, eds. 2015. Oxford Handbook of Transformations of the State. Oxford: Oxford University Press.

286 Bibliography

——, and Paul Pierson. 2000. ‘Social Policy: Left to Courts and Markets?’ In Policy-Making in the European Union, 4th edition, eds. Helen Wallace and William Wallace. Oxford: Oxford University Press, 267–92.

——, and Michael Zürn, eds. 2005. Transformations of the State? Cambridge: Cambridge University Press.

——, and ——, eds. 2006. Transformationen des Staates? Frankfurt am Main: Suhrkamp.Lenz, Hansrudi, and Marianne L. James. 2007. ‘International Audit Firms as Strategic

Networks: The Evolution of Global Professional Service Firms’. In Economics and Management of Networks: Franchising, Strategic Alliances, and Cooperatives, eds. Gérard Cliquet, George Hendrikse, Mika Tuunanen and Josef Windsperger. Heidelberg: Physica, 367–92.

Leuffen, Dirk, Berthold Rittberger and Frank Schimmelpfennig. 2013. Differentiated Integration: Explaining Variation in the European Union. Basingstoke: Palgrave Macmillan.

Levi, Margaret. 2002. ‘The State of the Study of the State’. In Political Science: State of the Discipline, eds. Ira Katznelson and Helen V. Milner. New York: W.W. Norton, 33–55.

Levy, Jonah, Stephan Leibfried and Frank Nullmeier. 2015. ‘Changing Perspectives on the State’. In The Oxford Handbook of Transformations of the State, eds. Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah Levy, Frank Nullmeier and John Stephens. Oxford: Oxford University Press, 33–57.

Lieberman, Robert C. 2002. ‘Ideas, Institutions, and Political Order: Explaining Political Change’. American Political Science Review 96(4): 697–712.

Lieberson, Stanley. 1991. ‘Small N’s and Big Conclusions: An Examination of the Reasoning in Comparative Studies Based on a Small Number of Cases’. Social Forces 70(2): 307–20.

Lijphart, Arend. 1971. ‘Comparative Politics and the Comparative Method’. American Political Science Review 65(3): 682–93.

——. 1999. Patterns of Democracy: Government Forms and Performance in Thirty-six Countries. New Haven: Yale University Press.

Lilla, Marco, and Stefano Staffolani. 2009. ‘The Evolution of Wage Inequality in Italy’. Applied Economics 41(15): 1873–92.

Lindner, Ulrike. 2007. ‘Die Krise des Wohlfahrtsstaats im Gesundheitssektor: Großbritannien, die Bundesrepublik Deutschland und Schweden im Vergleich 1960–1990’ [The Crisis of the Welfare State in the Health Sector: The United Kingdom, Germany and Sweden Compared]. Archiv für Sozialgeschichte 47: 297–324.

Lippert, André. 2009. ‘Der EuGH und die Goldenen Aktien: Zugleich ein Beitrag zur Dogmatik der Kapitalverkehrsfreiheit’ [The ECJ and Golden Shares: Or, a Contribution to the Jurisprudence of Free Capital Movement]. JURA 31(5): 342–8.

Lucifora, Claudio, and Dominique Meurs. 2006. ‘The Public Sector Pay Gap in France, Great Britain and Italy’. Review of Income and Wealth 52(1): 43–59.

Luckmann, Thomas. 1987. ‘Comments on Legitimation’. Current Sociology 35(2): 109–17.

Luhmann, Niklas. 1969. Legitimation durch Verfahren [Legitimation through Procedures]. Frankfurt am Main: Suhrkamp.

Lundahl, Christian, and Florian Waldow. 2009. ‘Standardisation and “Quick Languages”: The Shape-Shifting of Standardised Measurement of Pupil Achievement in Sweden and Germany’. Comparative Education 45(3): 365–85.

Bibliography 287

Luthardt, Ulf, and Jochen Zimmermann. 2009. ‘A European View on the Legitimacy of Accounting Procedures: Towards a Deliberative-Accountability Framework for Analysis’. Research in Accounting Regulation 21(2): 79–88.

Maarse, Hans. 2002. ‘The Politics of Waiting Lists in Dutch Health Care’. Eurohealth 8(5): 27–9.

Macaulay, Stewart. 1963. ‘Non-Contractual Relations in Business: A Preliminary Study’. American Sociological Review 28(1): 55–67.

Macneil, Ian R. 1978. ‘Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law’. Northwestern University Law Review 72(6): 854–905.

Maduro, Miguel P. 2007. ‘So Close and Yet So Far: The Paradoxes of Mutual Recognition’. Journal of European Public Policy 14(5): 814–25.

Mahon, Rianne, and Stephen McBride. 2008. ‘Introduction’. In The OECD and Transnational Governance, eds. Rianne Mahon and Stephen McBride. Vancouver: UBC Press, 3–22.

Mahoney, James. 2000. ‘Path Dependence in Historical Sociology’. Theory and Society 29(4): 507–48.

Maier, Matthias L., Achim Hurrelmann, Frank Nullmeier and Tanja Pritzlaff, eds. 2003. Politik als Lernprozess: Wissenszentrierte Ansätze der Politikanalyse [Politics as a Learning Process: Knowledge-centred Approaches to Political Analysis]. Opladen: Leske & Budrich.

Majone, Giandomenico, ed. 1996. Regulating Europe. London: Routledge.——. 2001a. ‘Regulatory Legitimacy in the United States and the European Union’. In

The Federal Vision: Legitimacy and Levels of Governance in the United States and the European Union, eds. Kalypso Nicolaïdis and Robert Howse. Oxford: Oxford University Press, 252–74.

——. 2001b. ‘Two Logics of Delegation: Agency and Fiduciary Relations in EU Governance’. European Union Politics 2(1): 103–22.

Mancini, Paolo. 2008. ‘Journalism Culture. A Multi-level Proposal’. In Journalistische Kulturen: Internationale und interdisziplinäre Theoriebausteine, eds. Oliver Hahn and Roland Schröder. Cologne: Halem, 149–67.

March, James G., and Johan P. Olsen. 1989. Rediscovering Institutions. New York: Free Press.Marcussen, Martin. 2004. ‘OECD Governance through Soft Law’. In Soft Law in

Governance and Regulation: An Interdisciplinary Analysis, ed. Ulrika Mörth. Cheltenham: Edward Elgar, 103–28.

Markusen, James R. 1995. ‘The Boundaries of Multinational Enterprises and the Theory of International Trade’. Journal of Economic Perspectives 9(2): 169–89.

Marmor, Theodore R. 2000. The Politics of Medicare, 2nd edition. New York: De Gruyter.——, Richard Freeman and Kieke Okma. 2005. ‘Comparative Perspectives and Policy

Learning in the World of Health Care’. Journal of Comparative Policy Analysis 7(4): 331–48.

——, and Gary J. McKissick. 2000. ‘Medicare’s Future: Fact, Fiction and Folly’. American Journal of Law and Medicine 26(2–3): 225–53.

Martens, Kerstin, and Anja P. Jakobi. 2009. ‘International Organisations as Governance Actors: The OECD in Education Policy’. In Governance of Welfare State Reform: A Cross National and Cross Sectoral Comparison of Policy and Politics, eds. Irene Dingeldey and Heinz Rothgang. Cheltenham: Edward Elgar, 90–108.

——, and ——. 2010. ‘Introduction: The OECD as an Actor in International Politics’. In Mechanisms of OECD Governance – International Incentives for National Policy-Making?, eds. Kerstin Martens and Anja P. Jakobi. Oxford: Oxford University Press, 1–25.

288 Bibliography

——, Alexander-Kenneth Nagel, Michael Windzio and Ansgar Weymann, eds. 2010. Transformations of Education Policy. Basingstoke: Palgrave Macmillan.

——, and Dennis Niemann. 2013. ‘When Do Numbers Count? The Differential Impact of Ratings and Rankings on National Education Policy in Germany and the US’. German Politics 22(3): 314–32.

——, Alessandra Rusconi and Kathrin Leuze, eds. 2007. New Arenas of Education Governance: The Impact of International Organizations and Markets on Educational Policy Making. Basingstoke: Palgrave Macmillan.

Martinelli, Alberto. 1981. ‘The Italian Experience: A Historical Perspective’. In State-owned Enterprise in the Western Economies, eds. Raymond Vernon and Yair Aharoni. London: Croom Helm, 85–98.

Martinez-Diaz, Leonardo. 2005. ‘Strategic Experts and Improvising Regulators: Explaining the IASC’s Rise to Global Influence 1973–2001’. Business and Politics 7(3): 1–25.

Mason, Edward S. 1957. Economic Concentration and the Monopoly Problem. Cambridge, MA: Harvard University Press.

Matthes, Jürgen. 2006. ‘Der Intrafirmenhandel deutscher US-Tochterunternehmen’ [Intra-company Trade of US Subsidiaries of German Companies]. IW-Trends 33(4): 1–17.

Maurer, Andreas. 2010. ‘Die Inhaltskontrolle transnationalen Rechts: Zur Inhaltskontrolle Allgemeiner Geschäftsbedingungen im grenzüberschreitenden (See)handel und deren Folgen’ [Content Control through Transnational Law: On the Content Control of Standard Business Conditions in International (Maritime)Trade and Its Consequences]. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 122).

——. 2012. Lex maritima: Grundzüge eines transnationalen Seehandelsrechts [Lex marit-ima: Outline of a Transnational Maritime Commercial Law]. Tübingen: Mohr Siebeck.

——, and Anna Beckers. 2009. ‘Lex Maritima’. In Soziologische Jurisprudenz: Festschrift für Gunther Teubner zum 65. Geburtstag, eds. Gralf-Peter Calliess, Andreas Fischer-Lescano, Dan Vielsch and Peer Zumbansen. Berlin: De Gruyter, 811–21.

Mavroidis, Petros C. 2002. ‘Amicus Curiae Briefs before the WTO. Much Ado about Nothing’. In European Integration and International Co-ordination: Studies in Transnational Economic Law in Honour of Claus-Dieter Ehlermann, eds. Armin von Bogdandy, Petros C. Mavroidis and Yves Mény. Dordrecht: Kluwer Academic Publishers, 317–29.

Mayntz, Renate. 2009. ‘Kausale Rekonstruktion: Theoretische Aussagen im akteurzen-trierten Institutionalismus’ [Causal Reconstruction: Theoretical Statements in Actor-centred Institutionalism]. In Sozialwissenschaftliches Erklären: Probleme der Theoriebildung und Methodologie. Frankfurt am Main: Campus, 83–92.

McCall Smith, James. 2000. ‘The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts’. International Organization 54(1): 137–80.

McCown, Margaret. 2003. ‘The European Parliament before the Bench: ECJ Precedent and EP Litigation Strategies’. Journal of European Public Policy 10(6): 974–95.

McMane, Aralynn A. 1998. ‘The French Journalists’. In The Global Journalist: News People Around the World, ed. David H. Weaver. Cresskill: Hampton Press, 191–212.

McNeely, Connie L., and Yun-Kyung Cha. 1994. ‘Worldwide Educational Convergence through International Organisations: Avenues for Research’. Education Policy Analysis Archives 2(14), http://elmu.umm.ac.id/file.php/1/jurnal/E/Education%20Policy%20Analysis/Vol2.1994/v2n14.html (last accessed 3 September 2014).

Bibliography 289

Megginson, William L., and Jeffry M. Netter. 2001. ‘From State to Market: A Survey of Empirical Studies on Privatization’. Journal of Economic Literature 39(2): 321–89.

Meininger, Marie-Christine. 2000. ‘The Development and Current Features of the French Civil Service System’. In Civil Service Systems in Western Europe, eds. Hans A.G.M. Bekke and Frits M. van der Meer. Cheltenham: Edward Elgar, 188–211.

Melly, Blaise. 2005. ‘Public-Private Sector Wage Differentials in Germany: Evidence from Quantile Regression’. Empirical Economics 30(2): 505–20.

Mertens, Jens Michael. 2010. ‘Wettbewerbspolitische Aspekte in der Entwicklung des modernen Privatrechts’ [Aspects of Competition Policy in the Development of Modern Private Law]. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 126).

——. 2011. Privatrechtsschutz und vertikale Integration im internationalen Handel [Protection through Private Law and Vertical Integration in International Trade]. Tübingen: Mohr Siebeck.

Micklewright, John, and Sylke V. Schnepf. 2006. ‘Response Bias in England in PISA 2000 and 2003’, http://webarchive.nationalarchives.gov.uk/20130401151715/ http://www.education.gov.uk/publications/eOrderingDownload/RR771.pdf (last accessed 25 August 2014).

——, —— and Chris Skinner. 2010. ‘Non-Response Biases in Surveys of School Children: The Case of the English PISA Samples’. Bonn: Institute for the Study of Labour (IZA Discussion Paper 4789), http://ftp.iza.org/dp4789.pdf (last accessed 25 August 2014).

Milgrom, Paul, Douglass C. North and Barry R. Weingast. 1990. ‘The Role of Institutions in the Revival of Trade: The Law Merchant, Private Judges, and the Champagne Fairs’. Economics and Politics 2(1): 1–23.

Miller, Alistair. 2007. ‘Rhetoric, Paideia and the Old Idea of a Liberal Education’. Journal of Philosophy of Education 41(2): 183–206.

Millward, Robert. 2004. ‘European Governments and the Infrastructure Industries, c. 1840–1915’. European Review of Economic History 8(1): 3–28.

——. 2011a. ‘Public Enterprise in the Modern Western World: An Historical Analysis’. Annals of Public and Cooperative Economics 82(4): 375–98.

——. 2011b. ‘Geo-politics versus Market Structure Interventions in Europe’s Infrastructure Industries c. 1830–1939’. Business History 53(5): 673–87.

Milner, Helen V., and Andrew Moravcsik, eds. 2009. Power, Interdependence, and Nonstate Actors in World Politics. Princeton: Princeton University Press.

Mondré, Aletta. 2009. ‘Judizialisierungsprozesse im Sicherheitsbereich: Friedensbedrohungen vor dem UN-Sicherheitsrat’ [Judicialization of Security Policy: Threats to Peace in the UN Security Council]. In Auf dem Weg zu internationaler Rechtsherrschaft? Streitbeilegung zwischen Politik und Recht, ed. Bernhard Zangl. Frankfurt am Main: Campus, 119–60.

——, Gerald Neubauer, Achim Helmedach and Bernhard Zangl. 2008. ‘Between Law and Politics: The Judicialization of International Dispute Settlement in the Fields of Security, Trade and the Environment’. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 71).

——, ——, —— and ——. 2010. ‘Uneven Judicialization: Comparing International Dispute Settlement in Security, Trade, and the Environment’. New Global Studies 4: Art. 2, http://www.degruyter.com/view/j/ngs.2010.4.1/ngs.2010.4.1.1081/ngs.2010. 4.1.1081.xml (last accessed 25 August 2014).

Moravcsik, Andrew. 2000. ‘The Origins of Human Rights Regimes: Democratic Delegation in Postwar Europe’. International Organization 54(2): 217–52.

290 Bibliography

——. 2005. ‘Is There a “Democratic Deficit” in World Politics? A Framework for Analysis’. In Global Governance and Public Accountability, eds. David Held and Mathias Koenig-Archibugi. Chichester: Wiley-Blackwell, 212–39.

Moss, David A. 2002. When All Else Fails: Government as the Ultimate Risk Manager. Cambridge, MA: Harvard University Press.

Mossialos, Elias. 1997. ‘Citizens’ Views on Health Care Systems in the 15 Member States of the European Union’. Health Economics 6(2): 109–16.

Mueller, Richard. 1998. ‘Public-Private Sector Wage Differentials in Canada: Evidence from Quantile Regressions’. Economics Letters 60(2): 229–35.

Nagel, Alexander-Kenneth, Kerstin Martens and Michael Windzio. 2010. ‘Introduction – Education Policy in Transformation’. In Transformation of Education Policy, eds. Kerstin Martens, Alexander-Kenneth Nagel, Michael Windzio and Ansgar Weymann. Basingstoke: Palgrave Macmillan, 3–25.

Neri, Stefano. 2008. ‘La costruzione dei Servizi Sanitari Regionali e la governance del sistema sanitario’ [The Structuring of the Regional Health Services and the Governance of the Health System]. Rivista delle Politiche Sociali (3): 97–114.

——. 2009. ‘Convergenza e divergenza nell´evoluzione recente dei servizi sanitari nazionali: Un confronto tra Regno Unito e Italia’ [Convergence and Divergence in the Recent Evolution of the National Health Service: A Comparison between the United Kingdom and Italy]. Stato e Mercato 87(3): 357–86.

Neubauer, Gerald. 2009a. ‘Judizialisierungsprozesse im Arbeitsschutzbereich: Vom Vorreiter zum Nachzügler’ [Judicialization and the Protection of Occupational Health: From Pioneer to Laggard]. In Auf dem Weg zu internationaler Rechtsherrschaft? Streitbeilegung zwischen Politik und Recht, ed. Bernhard Zangl. Frankfurt am Main: Campus, 191–227.

——. 2009b. ‘Judizialisierungsprozesse im Umweltbereich: Streitigkeiten über Verletzungen von CITES’ [Judicialization in Environmental Policy: Disputes on Violations of CITES]. In Auf dem Weg zu internationaler Rechtsherrschaft? Streitbeilegung zwischen Politik und Recht, ed. Bernhard Zangl. Frankfurt am Main: Campus, 161–90.

Nieke, Wolfgang. 2003. ‘Schulreform: Wie reagiert die Fachpolitik auf bildungswis-senschaftliche Bestandsaufnahmen?’ [School Reform: How does Education Policy React to Education Studies?]. In PISA – und die Folgen? Die Wirkung von Leis-tungsvergleichsstudien in der Schule, ed. Toni Hansel. Herbolzheim: Centaurus, 197–214.

Nielsen, Helena S., and Michael Rosholm. 2001. ‘The Public-Private Sector Wage Gap in Zambia in the 1990s: A Quantile Regression Approach’. Empirical Economics 26(1): 169–82.

Niemann, Dennis. 2010. ‘Turn of the Tide – New Horizons in German Education Policymaking through IO Influence’. In Transformation of Education Policy, eds. Kerstin Martens, Alexander-Kenneth Nagel, Michael Windzio and Ansgar Weymann. Basingstoke: Palgrave Macmillan, 77–104.

Nieminen, Hannu. 2009. ‘The European Public Sphere as a Network? Four Plus One Approaches’. In Manufacturing Europe: Spaces of Democracy, Diversity and Communication, ed. Inka Salovaara-Moring. Gothenburg: Nordicom, 19–34.

Noreng, Oystein. 1981. ‘State-owned Oil Companies: Western Europe’. In State-owned Enterprise in the Western Economies, eds. Raymond Vernon and Yair Aharoni. London: Croom Helm, 133–43.

North, Douglass C. 1991a. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press.

Bibliography 291

——. 1991b. ‘Institutions, Transaction Costs, and the Rise of Merchant Empires’. In The Political Economy of Merchant Empires, ed. James D. Tracy. Cambridge: Cambridge University Press, 22–40.

Nullmeier, Frank. 2009. ‘Formen der Staatlichkeit. Zu einer Analytik politischer Ordnungen’ [State Forms. Towards an Analysis of Political Orders]. In Staatlichkeit ohne Staat? Chancen und Aporien von Demokratie, Verfassung und Recht auf europäischer und globaler Ebene, eds. Nicole Deitelhoff and Jens Steffek. Frankfurt am Main: Suhrkamp, 35–56.

——, Dominika Biegon, Jennifer Gronau, Martin Nonhoff, Henning Schmidtke and Steffen Schneider. 2010. Prekäre Legitimitäten: Rechtfertigung von Herrschaft in der post-nationalen Konstellation [Precarious Legitimacies: Justifying Political Authority in the Post-national Constellation]. Frankfurt am Main: Campus.

——, Steffen Schneider and Andreas Hepp. 2015. ‘Transformations of the Democratic State’. In The Oxford Handbook of Transformations of the State, eds. Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah D. Levy, Frank Nullmeier and John D. Stephens. Oxford: Oxford University Press, 565–84.

Oaxaca, Ronald. 1973. ‘Male-Female Wage Differentials in Urban Labor Markets’. International Economic Review 14(3): 693–709.

Oberlander, Jonathan. 2010. ‘Long Time Coming: Why Health Reform Finally Passed’. Health Affairs 29(6): 1112–6.

Obinger, Herbert, Carina Schmitt and Reimut Zohlnhöfer. 2015. ‘Partisan Politics and Privatization in OECD Countries’. Comparative Political Studies 20(10): 1–30.

——, and Peter Starke. 2015. ‘Welfare State Transformation and the Rise of the Supply-Side Model’. In The Oxford Handbook of Transformations of the State, eds. Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah D. Levy, Frank Nullmeier, and John D. Stephens. Oxford: Oxford University Press, 465–81.

——, ——, Julia Moser, Claudia Bogedan, Edith Gindulis and Stephan Leibfried. 2010. Welfare State Transformation: Small States, Big Lessons. Oxford: Oxford University Press.

OECD. 2001a. Public Sector: An Employer of Choice? Paris: OECD.——. 2001b. Public Sector Leadership for the 21st Century. Paris: OECD.——. 2005a. Performance-related Pay Policies for Government Employees. Paris: OECD.——. 2005b. Modernising Government: The Way Forward. Paris: OECD.——. 2006. ‘Education at a Glance 2006 – Briefing Note for the United Kingdom 2006’,

http://www.oecd.org/dataoecd/32/50/37392956.pdf (last accessed 25 August 2014).——. 2010/2011. ‘Work on Education’. Paris: OECD.——. 2011. Government at a Glance 2011. Paris: OECD.Oehr, Tim-Frederik. 2012. Sozio-ökonomische Aspekte der Regulierung der Rechnungslegung

[Socio-economic Aspects of the Regulation of Accounting]. Frankfurt am Main: Peter Lang.

——, and Jochen Zimmermann. 2010. ‘Accounting and the Welfare State: The Missing Link’. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 121).

——, and ——. 2012. ‘Accounting and the Welfare State: The Missing Link’. Critical Perspectives on Accounting 23(2): 134–52.

Offerhaus, Anke, Anne Mollen and Andreas Hepp. 2014. ‘Nationalizing Europe Regionally – The Europeanization of Public Spheres in Regional Newspaper Reporting and the “Crisis” in Europe’. In Media and Communication on Europe, ed. Agnieszka Stępinska. Berlin: Logos, 13–32.

Ohmae, Kenichi. 1996. The End of the Nation State: The Rise of Regional Economies. New York: Free Press.

292 Bibliography

Okma, Kieke. 1997. Studies in Dutch Health Politics, Policies and Law. Utrecht: University of Utrecht, Medical Faculty (PhD Dissertation).

Oldham, James. 2004. English Common Law in the Age of Mansfield. Chapel Hill: University of North Carolina Press.

O’Leary, John. 2001. ‘Are We Not Such Dunces After All?’ The Times, 6 December 2001.Oledzki, Jerzy. 1998. ‘Polish Journalists. Professionals or Not?’ In The Global Journalist:

News People Around the World, ed. David H. Weaver. Cresskill: Hampton Press, 277–98.

Oliver, Adam, and Elias Mossialos. 2005. ‘European Health Systems Reforms: Looking Backward to See Forward?’ Journal of Politics, Policy and Law 30(1–2): 7–28.

Oliver, Peter, and Wulf-Henning Roth. 2004. ‘The Internal Market and the Four Freedoms’. Common Market Law Review 41(2): 407–41.

Olson, Mancur. 1965. The Logic of Collective Action. Cambridge, MA: Harvard University Press.

Österle, August, and Heinz Rothgang. 2010. ‘Long-Term Care’. In The Oxford Handbook of the Welfare State, eds. Francis G. Castles, Stephan Leibfried, Jane Lewis, Herbert Obinger and Christopher Pierson. Oxford: Oxford University Press, 405–17.

Painter, Martin, and B. Guy Peters. 2010. Tradition and Public Administration. Basingstoke: Palgrave Macmillan.

Paterlini, Marta. 2013. ‘Italy’s Health System Reforms on Hold’. Lancet 381(9872): 1085–6.

Patton, Michael Q. 2002. Qualitative Research and Evaluation Methods. Thousand Oaks: Sage.

Peabody, Robert L., Susan W. Hammond, Jean Torcom, Lynne P. Brown, Carolyn Thompson and Robin Kolodny. 1990. ‘Interviewing Political Elites’. Political Studies 23(3): 451–5.

Pedersen, Peter J., Jan B. Schmidt-Sorensen, Nina Smith and Niels Westergard-Nielsen. 1990. ‘Wage Differentials Between the Public and Private Sectors’. Journal of Public Economics 41(1): 125–45.

Peers, Steve. 2002. ‘Free Movement of Capital: Learning Lessons or Slipping on Spilt Milk?’ In The Law of the Single European Market: Unpacking the Premises, eds. Catherine Barnard and Joanne Scott. Oxford: Hart, 333–50.

Pelkmans, Jacques. 2007. ‘Mutual Recognition in Goods. On Promises and Disillusions’. Journal of European Public Policy 14(5): 699–716.

Perry, James, and Andreas Nöelke. 2005. ‘International Accounting Standard Setting: A Network Approach’. Business and Politics 7(3): 1–32.

Peters, Bernhard. 2005. ‘Public Discourse, Identity and the Problem of Democratic Legitimacy’. In Making the European Polity: Reflexive Integration in the EU, ed. Erik O. Eriksen. London: Routledge, 84–124.

——. 2008. Public Deliberation and Public Culture: Theoretical and Empirical Writings 1993–2006. Edited by Hartmut Wessler, with a Preface by Jürgen Habermas. Basingstoke: Palgrave Macmillan.

Peters, B. Guy. 2008. ‘The Napoleonic Tradition’. International Journal of Public Sector Management 21(2): 118–32.

Petretto, Alessandro, Stefania Lorenzini and Nicola Sciclone. 2003. ‘Il processo di decentramento sanitario tra passato e futuro’ [The Process of Health Decentralization between Past and Future]. In I servizi sanitari in Italia, ed. Gianluca Fiorentini. Bologna: Il Mulino, 39–71.

Pfetsch, Barbara. 2001. ‘Political Communication Culture in the United States and Germany’. International Journal of Press/Politics 6(1): 46–67.

Bibliography 293

Pierson, Paul. 1998. ‘Irresistible Forces, Immovable Objects: Post-industrial Welfare States Confront Permanent Austerity’. Journal of European Public Policy 5(4): 539–60.

——. 2000. ‘Increasing Returns, Path Dependence, and the Study of Politics’. American Political Science Review 94(2): 251–67.

——, ed. 2001. The New Politics of the Welfare State. Oxford: Oxford University Press.——. 2004. Politics in Time: History, Institutions, and Social Analysis. Princeton: Princeton

University Press.PIQUE. 2009. Privatisation of Public Services and the Impact on Quality, Employment and

Productivity: Summary Report. Vienna: PIQUE.Polanyi, Karl. 2001 (1944). The Great Transformation: The Political and Economic Origins

of Our Time. Boston: Beacon Press.Pollack, Mark A. 1994. ‘Creeping Competence: The Expanding Agenda of the European

Community’. Journal of Public Policy 14(2): 95–145.Pollitt, Christopher, and Geert Bouckaert. 2004. Public Management Reform: A

Comparative Analysis. Oxford: Oxford University Press.Pontusson, Jonas. 1989. ‘The Triumph of Pragmatism: Nationalization and

Privatization in Sweden’. In The Politics of Privatization in Western Europe, eds. John Vickers and Vincent Wright. London: Frank Cass, 129–40.

Popp, Marie. 2010. ‘Viel Lärm um PISA. Eine qualitative Medienanalyse zu den Reaktionen auf die PISA-Studie in Deutschland, Österreich, Spanien und Mexiko’ [Much Ado about PISA: A Qualitative Media Analysis of Reactions to the PISA Study in Germany, Austria and Mexico]. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 134).

Porter, Bruce D. 1994. War and the Rise of the State: The Military Foundations of Modern Politics. New York: Free Press.

Posner, Elliot, and Nicolas Veron. 2010. ‘The EU and Financial Regulation: Power Without Purpose?’ Journal of European Public Policy 17(3): 400–15.

Posner, Eric A., and John C. Yoo. 2005. ‘Judicial Independence in International Tribunals’. California Law Review 93(1): 1–74.

Posner, Richard A. 1976. Antitrust Law – An Economic Perspective. Chicago: University of Chicago Press.

——. 1979. ‘The Chicago School of Antitrust Analysis’. University of Pennsylvania Law Review 127(4): 925–48.

——. 1981. ‘The Next Step in the Antitrust Treatment of Restricted Distribution: Per Se Legality’. University of Chicago Law Review 48(6): 6–26.

Poterba, James M., and Kim S. Rueben. 1995. ‘The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods’. Cambridge, MA: National Bureau of Economic Research (Working Paper 4734).

Power, Sally, and Geoff Whitty. 1999. ‘New Labour’s Education Policy: First, Second or Third Way?’ Journal of Education Policy 14(5): 535–46.

Preston, Paschal, and Monika Metykova. 2009. ‘Media, Political Communication and the European Public Sphere’. In The European Public Sphere and the Media. Europe in Crisis, eds. Anna Triandafyllidou, Ruth Wodak and Michał Krzyżanowski. Basingstoke: Palgrave Macmillan, 34–49.

Princen, Sebastian. 2004. ‘EC Compliance with WTO Law: The Interplay of Law and Politics’. European Journal of International Law 15(3): 555–74.

Quadagno, Jill, and Debra Street. 2005. ‘Ideology and Public Policy: Antistatism in American Welfare State Transformation’. Journal of Policy and History 17(1): 52–71.

Quandt, Thorsten. 2008. ‘Methods of Journalism Research: Observation’. In Global Journalism Research: Theories, Methods, Findings, Future, eds. Martin Löffelholz, David Weaver and Andreas Schwarz. Malden: Blackwell, 131–42.

294 Bibliography

Rabel, Ernst. 1936. Das Recht des Warenkaufs: Eine rechtsvergleichende Darstellung [The Law of Purchasing Goods: A Comparative Study], vol. 1. Berlin: de Gruyter.

Raiser, Ludwig. 1935. Das Recht der allgemeinen Geschäftsbedingungen [The Law of Standard Business Conditions]. Bad Homburg von der Höhe: Hermann Gentner.

Raufer, Thilo. 2005. Die legitime Demokratie: Zur Begründung politischer Ordnung in der Bundesrepublik [Legitimate Democracy: Justifying Political Order in the Federal Republic of Germany]. Frankfurt am Main: Campus.

Raustiala, Kal. 2005. ‘Form and Substance in International Agreements’. The American Journal of International Law 99(3): 581–614.

Rawlings, Richard. 1993. ‘The Eurolaw Game: Some Deductions from Saga’. Journal of Law and Society 20(3): 309–40.

Reese, Stephen D. 2008. ‘Theorizing a Globalized Journalism’. In Global Journalism Research: Theories, Methods, Findings, Future, eds. Martin Löffelholz, David H. Weaver and Andreas Schwarz. Malden: Blackwell, 240–52.

Reichard, Christoph. 1999. ‘Innovationen im Personalmanagement’ [Innovations in Personnel Management]. In Innovation, Effektivität, Nachhaltigkeit: Internationale Erfahrungen zentralstaatlicher Verwaltungsreform, eds. Frieder Naschold, Werner Jann and Christoph Reichard. Berlin: Edition Sigma, 37–49.

——. 2005. ‘Personalmanagement’ [Personnel Management]. In Handbuch zur Verwal-tungsreform, 3rd edition, eds. Bernhard Blanke, Stefan von Bandemer, Frank Nullmeier and Göttrik Wewer. Wiesbaden: VS, 229–35.

Renner, Moritz. 2011. Zwingendes transnationales Recht: Zur Struktur der Wirtschaftsverfassung jenseits des Staates [Compelling Transnational Law: On the Structure of the Economic Constitution beyond the State]. Baden-Baden: Nomos.

Reus-Smit, Christian. 2007. ‘International Crises of Legitimacy’. International Politics 44(2/3): 157–74.

Richmond, Julius B., and Rashi Fein. 2005. The Health Care Mess: How We Got into It and What It Will Take to Get Out. Cambridge, MA: Harvard University Press.

Richter, Rudolf, and Eirik G. Furubotn. 2003. Neue Institutionenökonomik: Eine Einführung und kritische Würdigung [New Institutional Economics: An Introduction and Critical Evaluation], 3rd edition. Tübingen: Mohr Siebeck.

Rieger, Elmar, and Stephan Leibfried. 2003. Limits to Globalization: Welfare States and the World Economy. Cambridge: Polity Press.

Rinne, Risto, Johanna Kallo and Sanna Hokka. 2004. ‘Too Eager to Comply? OECD Education Policies and the Finnish Response’. European Educational Research Journal 3(2): 454–85.

Riordan, Michael H., and Steven C. Salop. 1995. ‘Evaluating Vertical Mergers: A Post-Chicago Approach’. Antitrust Law Journal 63(2): 513–68.

Risse, Thomas. 2010. A Community of Europeans? Transnational Identities and Public Spheres. Ithaca: Cornell University Press.

Rixen, Thomas. 2008. The Political Economy of International Tax Governance. Basingstoke: Palgrave Macmillan.

Röber, Manfred. 1996. ‘Germany’. In New Public Managers in Europe, eds. David Farnham, Sylvia Horton, John Barlow and Annie Hondeghem. Basingstoke: Palgrave Macmillan, 169–93.

Roberts, Simon. 2005. ‘After Government? On Representing Law Without the State’. Modern Law Review 68(1): 1–24.

Rodrik, Dani. 2000. ‘How Far Will International Economic Integration Go?’ Journal of Economic Perspectives 14(1): 177–86.

Roe, Mark J. 1996. ‘Chaos and Evolution in Law and Economics’. Harvard Law Review 109(3): 641–68.

Bibliography 295

Roessler, Frieder. 2000. ‘The Institutional Balance between the Judicial and the Political Organs of the WTO’. In New Directions in International Economic Law: Essays in Honour of John H. Jackson, eds. Marco C.E.J. Bronckers and Reinhard Quick. The Hague: Kluwer Law International, 325–45.

Rose, Richard. 1985. Public Employment in Western Nations. Cambridge: Cambridge University Press.

Rosenau, James N. 2002. ‘Governance in a New Global Order’. In Governing Globalization: Power, Authority and Global Governance, eds. David Held and Anthony G. McGrew. Cambridge: Polity Press, 70–86.

Rosewitz, Bernd, and Douglas Webber. 1990. Reformversuche und Reformblockaden im deutschen Gesundheitswesen [Reform Attempts and Reform Gridlock in German Health Policy]. Frankfurt am Main: Campus.

Rothenbacher, Franz. 1997. ‘Public Sector Employment in Europe – Where Will the Decline End?’ EURODATA Newsletter 6: 1–11.

——. 1998. ‘The Changing Public Sector in Europe: Social Structure, Income and Social Security’. EURODATA Newsletter 8: 1–6.

Rothgang, Heinz. 2006. ‘Die Regulierung von Gesundheitssystemen in vergleichender Perspektive: Auf dem Weg zur Konvergenz?’ [The Regulation of Health Systems in Comparative Perspective: En Route to Convergence?]. In Soziologie der Gesundheit, eds. Claus Wendt and Christof Wolf. Wiesbaden: VS, 298–319.

——. 2009. ‘Converging Governance in Healthcare Systems?’ In Governance of Welfare State Reform: A Cross National and Cross Sectoral Comparison of Policy and Politics, eds. Irene Dingeldey and Heinz Rothgang. Cheltenham: Edward Elgar, 21–42.

——, Mirella Cacace, Lorraine Frisina, Simone Grimmeisen, Achim Schmid and Claus Wendt. 2010. The State and Healthcare: Comparing OECD Countries. Basingstoke: Palgrave Macmillan.

——, ——, —— and Achim Schmid. 2008. ‘The Changing Public-Private Mix in OECD Healthcare Systems’. In Welfare State Transformations, ed. Martin Seeleib-Kaiser. Basingstoke: Palgrave Macmillan, 132–46.

——, ——, Simone Grimmeisen and Claus Wendt. 2005. ‘The Changing Role of the State in OECD Health Care Systems’. In Transformations of the State?, eds. Stephan Leibfried and Michael Zürn. Cambridge: Cambridge University Press, 187–212.

——, Herbert Obinger and Stephan Leibfried. 2006. ‘The State and Its Welfare State – How Do Welfare State Changes Affect the Make-up of the Nation State’. Social Policy and Administration 40(3): 250–66.

Rubenson, Kjell. 2008. ‘OECD Education Policies and World Hegemony’. In The OECD and Transnational Governance, eds. Rianne Mahon and Stephen McBride. Vancouver: UBC Press, 242–59.

Rueda, David, and Jonas Pontusson. 2000. ‘Wage Inequality and Varieties of Capitalism’. World Politics 52(3): 350–83.

Rühl, Giesela. 2011. Statut und Effizienz: Ökonomische Grundlagen des Internationalen Privatrechts [Law and Efficiency: Economic Foundations of International Private Law]. Tübingen: Mohr Siebeck.

Sabatier, Paul A., and Hank C. Jenkins-Smith. 1999. ‘The Advocacy Coalition Framework. An Assessment’. In Theories of the Policy Process, ed. Paul A. Sabatier. Boulder: Westview Press, 117–66.

Sand, Peter H. 1997. ‘Whither CITES? The Evolution of a Treaty Regime in the Borderland of Trade and Environment’. European Journal of International Law 8(1): 29–58.

Sanderson, Michael. 1993. ‘Vocational and Liberal Education: A Historian’s View’. European Journal of Education 28(2): 189–96.

296 Bibliography

Scharpf, Fritz W. 1988. ‘The Joint-Decision Trap: Lessons from German Federalism and European Integration’. Public Administration 66(3): 239–78.

——. 1997. Games Real Actors Play: Actor-centered Institutionalism in Policy Research. Boulder: Westview Press.

——. 1999. Governing in Europe: Effective and Democratic? Oxford: Oxford University Press.

——. 2000. ‘Interdependence and Democratic Legitimation’. In Disaffected Democracies: What’s Troubling the Trilateral Countries?, eds. Susan J. Pharr and Robert D. Putnam. Princeton: Princeton University Press, 101–20.

——. 2009. ‘Legitimacy in the Multilevel European Polity’. European Political Science Review 1(2): 173–204.

Schipper, Katherine. 2005. ‘The Introduction of International Accounting Standards in Europe: Implications for International Convergence’. European Accounting Review 14(1): 101–26.

Schlette, Volker. 1996. ‘Das neue Rechtsschutzsystem der Europäischen Menschen-rechtskonvention: Zur Reform des Kontrollmechanismus durch das 11. Protokoll’ [The New Legal Remedies of the European Human Rights Convention: Reforming the Supervisory Mechanism under Protocol No. 11]. Zeitschrift für ausländisches und öffentliches Recht 56(4): 905–76.

Schlosser, Peter. 1989. Das Recht der internationalen privaten Schiedsgerichtsbarkeit [The Law of International Private Arbitration], 2nd edition. Tübingen: Mohr Siebeck.

Schmid, Achim, Mirella Cacace, Ralf Götze and Heinz Rothgang. 2010. ‘Explaining Health Care System Change: Problem Pressure and the Emergence of “Hybrid” Health Care Systems’. Journal of Health, Policy, Politics and Law 35(4): 455–86.

——, and Ralf Götze. 2009. ‘Cross-National Policy Learning in Health System Reform: The Case of Diagnosis Related Groups’. International Social Security Review 62(4): 21–40.

Schmidt, Ingo. 2005. Wettbewerbspolitik und Kartellrecht: Eine interdisziplinäre Einführung [Competition Policy and Antitrust Law: An Interdisciplinary Introduction], 8th edi-tion. Stuttgart: Lucius & Lucius.

Schmidt, Reinhard H., and Gerald Spindler. 2002. ‘Path Dependence, Corporate Governance and Complementarity’. International Finance 5(3): 311–33.

Schmidt, Susanne K. 1998. Liberalisierung in Europa: Die Rolle der Europäischen Kommission [Liberalization in Europe: The Role of the European Commission]. Frankfurt am Main: Campus.

——. 2009. ‘When Efficiency Results in Redistribution: The Conflict over the Single Services Market’. West European Politics 32(4): 847–65.

——. 2010. ‘Gefangen im “lock in”? Zur Pfadabhängigkeit der Rechtsprechung des Europäischen Gerichtshofs’ [Being ‘Locked in’? The Path-Dependence of the Jurisprudence of the European Court of Justice]. Der moderne Staat 3(2): 455–73.

Schmidt, Vivien A. 2010. ‘Taking Ideas and Discourse Seriously: Explaining Change through Discursive Institutionalism as the Fourth “New Institutionalism”’. European Political Science Review 2(1): 1–25.

Schmidtke, Henning, and Frank Nullmeier. 2011. ‘Political Valuation Analysis and the Legitimacy of International Organizations’. German Policy Studies 7(3): 117–53.

——, and Steffen Schneider. 2012. ‘Methoden der empirischen Legitimationsforschung: Legitimität als mehrdimensionales Konzept’ [Methods of Empirical Legitimacy Research: Legitimacy as a Multi-dimensional Concept]. In Der Aufstieg der Legitimitätspolitik: Rechtfertigung und Kritik politisch-ökonomischer Ordnungen. Baden-Baden: Nomos, 225–44.

Bibliography 297

Schmidt-Trenz, Hans-Jörg. 1990. Außenhandel und Territorialität des Rechts: Grundlegung einer neuen Institutionenökonomik [Foreign Trade and the Territoriality of Law: Foundations of a New Institutional Economics]. Baden-Baden: Nomos.

——, and Dieter Schmidtchen. 1991. ‘Private International Trade in the Shadow of the Territoriality of Law: Why Does It Work?’ Southern Economic Journal 58(2): 329–38.

Schmitt, Carina. 2013. ‘The Employment Effects of Privatizing Public Utilities in OECD Countries’. Public Management Review, online first view, http://www.tandfonline. com/doi/abs/10.1080/14719037.2013.792379 (last accessed 25 August 2014).

——, and Philipp Schuster. 2010. ‘The Retreat of the State from Telecommunication Services in European Countries’. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 117).

Schnapp, Kai-Uwe. 2004. Ministerialbürokratien in westlichen Demokratien: Eine ver-gleichende Analyse [Ministerial Bureaucracies in Western Democracies: A Comparative Analysis]. Opladen: Leske & Budrich.

Schneider, Steffen, Achim Hurrelmann, Zuzana Krell-Laluhová, Frank Nullmeier and Achim Wiesner. 2010. Democracy’s Deep Roots. Basingstoke: Palgrave Macmillan.

Schneider, Volker, and Frank M. Häge. 2008. ‘Europeanization and the Retreat of the State’. Journal of European Public Policy 15(1): 1–19.

——, and Marc Tenbrücken, eds. 2004. Der Staat auf dem Rückzug: Die Privatisierung öffentlicher Infrastrukturen [The Retreat of the State: The Privatization of Public Infrastructures]. Frankfurt am Main: Campus.

Schuster, Philipp. 2013. ‘One for All and All for One: Privatization and Universal Service Provision in the Postal Sector’. Applied Economics 45(26): 3667–82.

Schut, Frederik T. 1995. ‘Health Care Reform in the Netherlands: Balancing Corporatism, Etatism and Market Mechanisms’. Journal of Health Politics, Policy and Law 20(3): 615–52.

——, and Wynand van de Ven. 2005. ‘Rationing and Competition in the Dutch Health-care System’. Health Economics 14(S1): 59–74.

Schwartz, Herman. 2001. ‘Round up the Usual Suspects! Globalization, Domestic Politics and Welfare State Change’. In The New Politics of the Welfare State, ed. Paul Pierson. Oxford: Oxford University Press, 17–44.

Schwartz, Warren F., and Alan O. Sykes. 2002. ‘The Economic Structure of Renegotiation and Dispute Resolution in the World Trade Organization’. Journal of Legal Studies 31(1): 179–204.

Scott, Joanne. 2004. ‘International Trade and Environmental Governance: Relating Rules (and Standards) in the EU and the WTO’. European Journal of International Law 15(2): 307–54.

Shapiro, Martin, and Alec Stone Sweet. 2002. On Law, Politics, and Judicialization. Oxford: Oxford University Press.

Shapiro, Robert Y., and John T. Young. 1989. ‘Public Opinion and the Welfare State: The United States in Comparative Perspective’. Political Science Quarterly 104(1): 59–89.

Sharman, Jason C. 2007. ‘Rationalist and Constructivist Perspectives on Reputation’. Political Studies 55(1): 20–37.

Shaw, Martin. 2000. Theory of the Global State: Globality as an Unfinished Revolution. Cambridge: Cambridge University Press.

Siegel, Nico A. 2002. Baustelle Sozialpolitik: Konsolidierung und Rückbau im internationalen Vergleich [The Welfare State as a Construction Site: Consolidation and Retrenchment in International Comparison]. Frankfurt am Main: Campus.

Siems, Mathias. 2005. Die Konvergenz der Rechtssysteme im Recht der Aktionäre: Ein Beitrag zur vergleichenden Corporate Governance in Zeiten der Globalisierung [The Convergence of Legal Systems in the Law of Shareholders: A Contribution to

298 Bibliography

Comparative Corporate Governance in Times of Globalization]. Tübingen: Mohr Siebeck.

Sikka, Prem, and Hugh Willmott. 1995. ‘The Power of “Independence”: Defending and Extending the Jurisdiction of Accounting in the United Kingdom’. Accounting, Organizations and Society 20(6): 547–81.

Sil, Rudra, and Peter J. Katzenstein. 2010. Beyond Paradigms. Analytic Eclecticism in the Study of World Politics. Basingstoke: Palgrave Macmillan.

Simon, Brian. 1991. Education and the Social Order, 1940–1990. London: Lawrence and Wishart.

Slaughter, Anne-Marie. 2004. A New World Order. Princeton: Princeton University Press.Smith, Sharon. 1976. ‘Pay Differentials between Federal Government and Private

Sectors Workers’. Industrial and Labour Relations Review 29(2): 233–57.——. 1977. Equal Pay in the Public Sector: Fact or Fantasy. Princeton: Princeton

University, Industrial Relations Section.Sørensen, Georg. 2004. The Transformation of the State: Beyond the Myth of Retreat.

Basingstoke: Palgrave Macmillan.Sosa, Fabian. 2009. ‘Cross-Border Dispute Resolution from the Perspective of Mid-sized

Law Firms – The Example of International Commercial Arbitration’. In Contractual Certainty in International Trade – Empirical Studies and Theoretical Debates on Institutional Support for Global Economic Exchanges, ed. Volkmar Gessner. Oxford: Hart, 107–55.

Starke, Peter. 2008. Radical Welfare State Retrenchment: A Comparative Analysis. Basingstoke: Palgrave Macmillan.

——, and Herbert Obinger. 2009. ‘Are Welfare States Converging? Recent Social Policy Developments in Advanced OECD Countries’. In Governance of the Welfare State: A Cross National and Cross Sectoral Comparison of Policy and Politics, eds. Irene Dingeldey and Heinz Rothgang. Cheltenham: Edward Elgar, 113–41.

——, —— and Francis G. Castles. 2008. ‘Convergence Towards Where: In What Ways, If Any, Are Welfare States Becoming More Similar?’ Journal of European Public Policy 15(7): 975–1000.

Starr, Paul. 1982. The Social Transformation of American Medicine: The Rise of a Sovereign Profession and the Making of a Vast Industry. New York: Basic Books.

Steinmo, Sven. 2010. The Evolution of Modern States: Sweden, Japan, and the United States. Cambridge: Cambridge University Press.

——, Kathleen Thelen and Frank Longstreth, eds. 1992. Structuring Politics: Historical Institutionalism in Comparative Analysis. Cambridge: Cambridge University Press.

——, and Jon Watts. 1995. ‘It’s the Institutions, Stupid! Why Comprehensive National Health Insurance Always Fails in America’. Journal of Health Politics, Policy and Law 20(2): 329–72.

Stevenson, David. 1999. ‘War by Timetable? The Railway Race before 1914’. Past and Present 162(1): 163–94.

Stiefel, Dieter. 2011. Verstaatlichung und Privatisierung in Österreich: Illusion und Wirklichkeit [Nationalization and Privatization in Austria: Illusion and Reality]. Vienna: Böhlau.

Stiglitz, Joseph E. 2004. The Roaring Nineties: A New History of the World’s Most Prosperous Decade. New York: W.W. Norton.

Stone Sweet, Alec. 1997. ‘The New GATT: Dispute Resolution and the Judicialization of the Trade Regime’. In Law Above Nations: Supranational Courts and the Legalization of Politics, ed. Mary L. Volcansek. Gainesville: University Press of Florida, 118–41.

Bibliography 299

——. 2002. ‘Path Dependence, Precedent, and Judicial Power’. In On Law, Politics, and Judicialization, eds. Martin Shapiro and Alec Stone Sweet. Oxford: Oxford University Press, 112–35.

——. 2004. The Judicial Construction of Europe. Oxford: Oxford University Press.——. 2010. ‘The European Court of Justice and the Judicialization of EU Governance’.

Living Reviews in European Governance 5(2): 1–50, http://europeangovernance. livingreviews.org/Articles/lreg-2010-2/ (last accessed 25 August 2014).

Strange, Susan. 2009. The Retreat of the State: The Diffusion of Power in the World Economy. Cambridge: Cambridge University Press.

Strauss, Anselm C., and Juliet Corbin. 1998. Basics of Qualitative Research: Techniques and Procedures for Developing Grounded Theory. London: Sage.

Streeck, Wolfgang, and Kathleen Thelen, eds. 2005. Beyond Continuity: Institutional Change in Advanced Political Economies. Oxford: Oxford University Press.

Streit, Manfred E., and Antje Mangels. 1996. ‘Privatautonomes Recht und grenz-überschreitende Transaktionen’ [Private-Autonomous Law and Cross-Border Transactions]. ORDO 47: 73–100.

Suleiman, Ezra. 2003. Dismantling Democratic States. Princeton: Princeton University Press.

Sun, Jeanne-Mey, and Jacques Pelkmans. 1995. ‘Regulatory Competition in the Single Market’. Journal of Common Market Studies 33(1): 67–89.

Sundberg, Fredrik G.E. 2001. ‘Control of Execution of Decisions Under the ECHR – Some Remarks on the Committee of Ministers’ Control of the Proper Implementation of Decisions Finding Violations of the Convention’. In International Human Rights Monitoring Mechanisms: Essays in Honour of Jakob Th. Möller, eds. Gudmundur Alfredsson, Jonas Grimheden, Bertrand G. Ramcharan and Alfred de Zayas. The Hague: Nijhoff, 561–86.

Swank, Duane. 2005. ‘Globalisation, Domestic Politics, and Welfare State Retrenchment in Capitalist Societies’. Social Policy and Society 4(2): 183–95.

Tansey, Oisín. 2007. ‘Process Tracing and Elite Interviewing’. Political Science and Politics 40(4): 765–72.

Taroni, Francesco. 2011. Politiche sanitarie in Italia: Il futuro del SSN in una prospettiva storica [Health Policy in Italy: The Future of the Servizio Sanitario Nazionale in a Historical Perspective]. Rome: Il Pensiero Scientifico Editore.

Taylor-Gooby, Peter. 2002. ‘The Silver Age of the Welfare State: Perspectives on Resilience’. Journal of Social Policy 31(4): 597–621.

Teece, David J. 1985. ‘Multinational Enterprise, Internal Governance, and Industrial Organization’. American Economic Review 75(2): 233–8.

Tepe, Markus, Karin Gottschall and Bernhard Kittel. 2010. ‘A Structural Fit between States and Markets? Public Administration Regimes and Market Economy Models in the OECD’. Socio-Economic Review 8(4): 653–84.

——, and Daniela Kroos. 2010. ‘Lukrativer Staatsdienst? Lohndifferenzen zwischen öffentlichem Dienst und Privatwirtschaft’ [A Well-paid Civil Service? Pay Differentials between Public Service and the Private Economy]. WSI-Mitteilungen 63(1): 3.

Teubner, Gunther. 2000a. ‘Privatregimes: Neo-spontanes Recht und duale Sozialverfassungen in der Weltgesellschaft’ [Private Law Regimes: Neo-spontaneous Law and Dual Social Constitutions in World Society]. In Zur Autonomie des Individuums: Liber Amicorum Spiros Simitis, eds. Dieter Simon and Manfred Weiss. Baden-Baden: Nomos, 437–53.

——. 2000b. ‘Contracting Worlds: The Many Autonomies of Private Law’. Social and Legal Studies 9(3): 399–417.

300 Bibliography

——. 2004. ‘Global Private Regimes: Neo-spontaneous Law and Dual Constitution of Autonomous Sectors in World Society’. In Public Governance in the Age of Globalization, ed. Karl-Heinz Ladeur. Aldershot: Ashgate, 71–87.

Thacker, Strom C. 1999. ‘NAFTA Coalitions and the Political Viability of Neoliberalism in Mexico’. Journal of Interamerican Studies and World Affairs 41(2): 57–89.

The Economist. 2004. ‘Bad Marks All Round’. The Economist, 11 December 2004, http://www.economist.com/node/3478050 (last accessed 25 August 2014).

Thussu, Daya K. 2006. International Communication: Continuity and Change, 2nd edi-tion. London: Arnold.

Tilly, Charles. 1993. Coercion, Capital and European States, AD 990–1992. Cambridge, MA: Blackwell.

Timmins, Nicholas. 2011. ‘Remaking England’s National Health Service? Not So Fast’. Health Affairs 30(8): 1399–401.

Tomlinson, John. 1999. Globalization and Culture. Chicago: University of Chicago Press.Toninelli, Pier A., ed. 2000. The Rise and Fall of State-owned Enterprise in the Western

World. Cambridge: Cambridge University Press.Toth, Akos G. 2005. The Oxford Encyclopaedia of European Community Law, vol. 2: The

Law of the Single Market. Oxford: Oxford University Press.Towse, Adrian, and Jon Sussex. 2000. ‘“Getting UK Health Care Expenditure Up to the

European Union Mean” – What Does That Mean?’ British Medical Journal 320(7235): 640–2.

Trachtman, Joel P. 1999. ‘The Domain of WTO Dispute Resolution’. Harvard International Law Journal 40(2): 333–77.

Trenz, Hans-Jörg. 2004. ‘Media Coverage on European Governance: Exploring the European Public Sphere in National Quality Newspapers’. European Journal of Communication 19(3): 291–319.

——. 2009. ‘Uniting and Dividing: The European Public Sphere as an Unfinished Project’. In Manufacturing Europe: Spaces of Democracy, Diversity and Communication, ed. Inka Salovaara-Moring. Gothenburg: Nordicom, 19–35.

Triandafyllidou, Anna, Ruth Wodak and Michał Krzyżanowski, eds. 2009. The European Public Sphere and the Media: Europe in Crisis. Basingstoke: Palgrave Macmillan.

Triebel, Volker. 2008. ‘Der Kampf ums anwendbare Recht’ [The Struggle over Applicable Laws]. Anwaltsblatt (5): 305–8.

Tsebelis, George. 1995. ‘Decision Making in Political Systems: Veto Players in Presidentialism, Parliamentarism, Multicameralism and Multipartyism’. British Journal of Political Science 25(3): 289–325.

——. 2002. Veto Players: How Political Institutions Work. Princeton: Princeton University Press.

——, and Geoffrey Garrett. 2001. ‘The Institutional Foundations of Intergovernmen-talism and Supranationalism in the European Union’. International Organization 55(2): 357–90.

Tuohy, Carolyn H. 1999. Accidental Logics: The Dynamics of Change in the Health Care Arena in the United States, Britain, and Canada. Oxford: Oxford University Press.

Turner, Victor. 1995. The Ritual Process: Structure and Anti-Structure. Chicago: Aldine.Tversky, Amos, and Daniel Kahneman. 1989. ‘Rational Choice and the Framing of

Decisions’. In Decision Making: Descriptive, Normative, and Prescriptive Interactions, eds. David E. Bell, Howard Raiffa and Amos Tversky. Cambridge: Cambridge University Press, 167–92.

Tweedie, David, and Thomas R. Seidenstein. 2005. ‘Setting a Global Standard: The Case for Accounting Convergence’. Northwestern Journal of International Law and Business 25(3): 589–608.

Bibliography 301

Vandenabeele, Wouter. 2008. ‘Government Calling: Public Service Motivation as an Element in Selecting Government as an Employer of Choice’. Public Administration 86(4): 1089–105.

van Essen, Anne Marije, and Paul Pennings. 2009. ‘Balancing Competing Goals: Exploring the Political Controversy on New Hospital Payment Systems in Germany, the Netherlands and the UK’. Zeitschrift für vergleichende Politikwissenschaft 3(1): 59–80.

van Kersbergen, Kees. 2000. ‘The Declining Resistance of National Welfare States to Change?’ In Survival of the European Welfare State, ed. Stein Kuhnle. London: Routledge, 19–36.

Vauchez, Antoine. 2010. ‘The Transnational Politics of Judicialization. Van Gend en Loos and the Making of EU Polity’. European Law Journal 16(1): 1–28.

Vermulst, Edwin A., and Folkert Graafsma. 2005. WTO Dispute Settlement: Anti-Dumping, Countervailing Duties and Safeguards. London: Cameron May.

Vicarelli, Giovanna. 1997. Alle radici della politica sanitaria in Italia. Società e salute da Crispi al facismo [On the Roots of Italian Health Politics: Society and Health from Crispi to Fascism]. Bologna: Il Mulino.

Visser, Jelle, and Anton Hemerijck. 1997. A Dutch Miracle: Job Growth, Welfare Reform and Corporatism in the Netherlands. Amsterdam: Amsterdam University Press.

Voßkuhle, Andreas. 2009. ‘Der europäische Verfassungsgerichtsverbund’ [The European Compound of Constitutional Courts]. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 106).

Wagner, Adolph. 1911. ‘Staat (in nationalökonomischer Sicht)’ [The State (in the Perspective of National Economics)]. In Handwörterbuch der Staatswissenschaften, vol. 7, eds. J. Conrad, L. Elster, W. Lexis and E. Loening. Jena: Gustav Fischer, 727–39.

Weaver, R. Kent. 2010. ‘Paths and Forks or Chutes and Ladders? Negative Feedbacks and Policy Regime Change’. Journal of Public Policy 30(2): 137–62.

Weber, Max. 1978 (1922). Economy and Society: An Outline of Interpretive Society. Berkeley: California University Press.

Weiler, Joseph H.H. 1994. ‘A Quiet Revolution. The European Court of Justice and Its Interlocutors’. Comparative Political Studies 26(4): 510–34.

Weischenberg, Siegfried, Martin Löffelholz and Armin Scholl. 1998. ‘Journalism in Germany’. In The Global Journalist: News People Around the World, ed. David H. Weaver. Cresskill: Hampton Press, 229–56.

Weiss, Linda. 1998. The Myth of the Powerless State. Ithaca: Cornell University Press.Wendt, Alexander. 1999. Social Theory of International Politics. Cambridge: Cambridge

University Press.Wendt, Claus, Lorraine Frisina and Heinz Rothgang. 2009. ‘Healthcare System Types:

A Conceptual Framework for Comparison’. Social Policy and Administration 43(1): 70–90.

Wengenroth, Ulrich. 2000. ‘The Rise and Fall of State-owned Enterprise in Germany’. In The Rise and Fall of State-owned Enterprise in the Western World, ed. Pier A. Toninelli. Cambridge: Cambridge University Press, 103–27.

Werner, Jörg R. 2008. Unternehmenspublizität und Corporate Governance im Wandel: Staatliche Steuerungsmodelle im internationalen Vergleich [The Transformation of Publicity Obligations of Enterprises and Corporate Governance: An International Comparison of Public Governance Approaches]. Frankfurt am Main: Campus.

——, and Jochen Zimmermann. 2007. ‘The Role of the Nation State in the Internationalization of Accounting Regimes’. In Transforming the Golden-Age Nation State, eds. Achim Hurrelmann, Stephan Leibfried, Kerstin Martens and Peter Mayer. Basingstoke: Palgrave Macmillan, 173–92.

302 Bibliography

——, and ——. 2009. ‘Internationaler Vergleich von Rechnungslegungssystemen: Stand und Perspektiven’ [International Comparison of Accounting Systems: State of the Art and Perspectives]. Die Betriebswirtschaft 69(1): 85–106.

Wessler, Hartmut, Bernhard Peters, Michael Brüggemann, Katharina Kleinen-von Königslöw and Stefanie Sifft. 2008. Transnationalization of Public Spheres. Basingstoke: Palgrave Macmillan.

Westlund, Hans. 1998. ‘State and Market Forces in Swedish Infrastructure History’. Scandinavian Journal of History 23(1–2): 65–88.

Whitty, Geoff. 2002. ‘Quasi-markets in Education’. In Education and Sociology: An Encyclopaedia, eds. David Levinson, Peter W. Cookson and Alan R. Sadovnik. New York: Routledge, 473–84.

Wilde, Stephanie. 2002. ‘Secondary Education in Germany 1990–2000: “One Decade of Non-Reform in Unified German Education”?’ Oxford Review of Education 28(1): 39–51.

Williamson, Oliver E. 1968. ‘Economies as an Antitrust Defense: The Welfare Tradeoffs’. American Economic Review 58(1): 18–36.

——. 1975. Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press.

——. 1985. The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press.

——. 2005a. ‘The Economics of Governance’. American Economic Review 95(2): 1–18.——. 2005b. ‘Transaction Cost Economics’. In Handbook of New Institutional Economics,

eds. Claude Ménard and Mary M. Shirley. Dordrecht: Springer, 41–65.Wilsford, David. 1994. ‘Path Dependency or Why History Makes It Difficult but Not

Impossible to Reform Health Care Systems in a Big Way’. Journal of Public Policy 14(3): 251–83.

——. 1995. ‘States Facing Interests: Struggles over Health Care Policy in Advanced, Industrial Democracies’. Journal of Health Politics, Policy and Law 20(3): 571–613.

Wise, Lois R. 1996. ‘Internal Labor Markets’. In Civil Service Systems in Comparative Perspective, eds. Hans A.G.M. Bekke, James L. Perry and Theo A.J. Toonen. Bloomington: Indiana University Press, 100–18.

Witt, Ulrich. 2002. ‘How Evolutionary is Schumpeter’s Theory of Economic Development?’ Industry and Innovations 9(1–2): 7–22.

——. 2008. ‘Evolutionary Economics’. In The New Palgrave Dictionary of Economics, vol. 3, 2nd edition, eds. Steven N. Durlauf and Lawrence E. Blume. Basingstoke: Palgrave Macmillan, 67–73.

Wolf, Frieder. 2008. ‘Die Schulpolitik – Kernbestand der Kulturhoheit’ [Education Policy – The Core of Cultural Länder Autonomy]. In Die Politik der Bundesländer: Staatstätigkeit im Vergleich, eds. Achim Hildebrandt and Frieder Wolf. Wiesbaden: VS, 21–41.

Woods, Philipp A. 2002. ‘Space for Idealism? Politics and Education in the United Kingdom’. Educational Policy 16(1): 118–38.

World Bank. 1994. Averting the Old Age Crisis. Washington, DC: World Bank.Wüstemann, Jens. 2003. ‘Disclosure Regimes and Corporate Governance’. Journal of

Institutional and Theoretical Economics 159(4): 717–26.Yarbrough, Beth V., and Robert M. Yarbrough. 1997. ‘Dispute Settlement in

International Trade: Regionalism and Procedural Coordination’. In The Political Economy of Regionalism, eds. Edward D. Mansfield and Helen V. Milner. New York: Columbia University Press, 134–63.

Bibliography 303

Zangl, Bernhard. 2005. ‘Is There an Emerging International Rule of Law?’ In Transformations of the State?, eds. Stephan Leibfried and Michael Zürn. Cambridge: Cambridge University Press, 73–91.

——. 2008. ‘Judicialization Matters! A Comparison of Dispute Settlement Under GATT and the WTO’. International Studies Quarterly 52(4): 825–54.

——, ed. 2009. Auf dem Weg zu internationaler Rechtsherrschaft? Streitbeilegung zwischen Politik und Recht [Toward an International Rule of Law? Dispute Resolution between Politics and Law]. Frankfurt am Main: Campus.

——, Achim Helmedach, Aletta Mondré, Alexander Kocks, Gerald Neubauer and Kerstin Blome. 2012. ‘Between Law and Politics: Explaining International Dispute Settlement Behaviour’. European Journal of International Relations 18(2): 369–401.

Zeff, Stephen A. 2012. ‘The Evolution of the IASC into the IASB, and the Challenges It Faces’. Accounting Review 87(3): 807–37.

Zeile, William J. 1997. ‘U.S. Intrafirm Trade in Goods’. Survey of Current Business 77(2): 23–38.

Zimmermann, Jochen, Johannes Schymczyk and Jan-Philipp Kilian. 2010. ‘Convergence Patterns in Accounting Regulation: Six Country Cases’. Bremen: University of Bremen, Transformations of the State Research Centre (Working Paper 119).

——, and Jörg R. Werner. 2013. Regulating Capitalism? The Evolution of Transnational Accounting Governance. Basingstoke: Palgrave Macmillan.

——, —— and Philipp B. Volmer. 2008. Global Governance in Accounting: Rebalancing Public Power and Private Commitment. Basingstoke: Palgrave Macmillan.

Zohlnhöfer, Reimut, Herbert Obinger and Frieder Wolf. 2008. ‘Partisan Politics, Globalization, and the Determinants of Privatization Proceeds in Advanced Democracies (1990–2000)’. Governance 21(1): 95–121.

Zürn, Michael. 1998. Regieren jenseits des Nationalstaates [Governing beyond the Nation State]. Frankfurt am Main: Suhrkamp.

——. 2000. ‘Democratic Governance Beyond the Nation-State: The EU and Other International Institutions’. European Journal of International Relations 6(2): 183–221.

——. 2004. ‘Global Governance and Legitimacy Problems’. Government and Opposition 39(2): 260–87.

——, Martin Binder and Matthias Ecker-Ehrhardt. 2012. ‘International Authority and Its Politicization’. International Theory 4(1): 69–106.

——, and Nicole Deitelhoff. 2015. ‘Internationalization and the State: Sovereignty as the External Side of Modern Statehood’. In The Oxford Handbook of Transformations of the State, eds. Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah Levy, Frank Nullmeier and John Stephens. Oxford: Oxford University Press, 193–217.

——, and Stephan Leibfried. 2005. ‘Reconfiguring the National Constellation’. In Transformations of the State?, eds. Stephan Leibfried and Michael Zürn. Cambridge: Cambridge University Press, 1–36.

305

Index

accountability, 170, 179, 228, 230–1actor coalitions and constellations, 11adaptive expectations, 79, 203adjudication, 95, 108–9, 120–2, 127administration, see public

administrationadverse selection, 196, 203, 238–9Africa, 154agenda-setting, 227Allison, Graham T., 16Alter, Karen J., 90, 109Amato, Giuliano, 231amicus curiae briefs, 121–3Anglo-Saxon countries, 30, 67, 182Appellate Body (Dispute Settlement

Body, Dispute Settlement Understanding), see World Trade Organization (WTO)

arbitrage, 115arbitration, 109, 129, 130, 136–42, 204,

251, 255asylum seekers, 178

see also migrationauditors, auditing firms, 67, 79–80austerity policy, 6, 33, 37, 195–6, 199,

223, 225, 227, 233–8, 242–5Australia

federalism: Commonwealth and state governments, 22

political parties and governments: Labor, 24

privatization, 30, 38(public) corporations: Qantas, 24state- and nation-building, 20–2WTO litigation, 121–2

Austriaeconomic policy (Keynesian),

200, 201Europeanization of public spheres

and media, 151–2federalism: Länder (federal states), 194,

195journalistic practices, 153–62manufacturing industries, 25, 31National Socialism, 24

political parties and governments: Christian Social Party, 21; post-World War II national unity government, 24

privatization, 38, 201social policy: family, 194–5; health,

196, 203; labour market, 194, 201; pension, 191–2, 202; welfare regime (Bismarckian, conservative) and its change, 190, 197, 203, 205

Vienna, 21

bailouts, 25, 37Baltic and International Maritime

Council (BIMCO), 136banks

central banks, 24commercial banks, 21, 24, 25, 27,

75, 79, 82‘beggar-thy-neighbour’ policies, 206Belgium, 38, 139beliefs, belief systems, 7, 11,

13–14, 209, 226–7, 236, 252, 257, 259–60

Berlusconi, Silvio, 232–3benchmarking, 79, 226‘Big Four’, see auditors,

auditing firmsBlair, Tony, 219, 229Bolger, Jim, 203–4bounded rationality, 11, 72, 74

see also rational-choice approachBretton Woods system, 258

see also World BankBrown, Gordon, 221bureaucracy, bureaucrats, see public

administrationbusiness and employers’ associations,

97, 101, 236–7, 259business management, 129

Callaghan, James, 218 Cameron, David, 229Canada, 30, 38, 69–70, 76–7, 216

306 Index

capitalismdemocratic capitalism, 3varieties of (coordinated and liberal),

5, 26welfare capitalism, 5, 26see also economies, types of

capital markets, see financial marketscartels and cartel law, see lawcase law, see lawcentre-periphery structures, 231charter parties, 136China, People’s Republic of, 101, 125,

142, 222Ciampi, Carlo A., 231cities, see municipalities, municipal

governmentcitizens, citizenship, 98, 115, 128,

169–72, 185, 227civil aviation, 24civil servants, civil services, see public

administrationcivil society, 127–8, 160Clinton, William J. (Bill), 185, 240Coase, Ronald H., 134collective action, problems of, 11,

108–11, 259collective (wage) bargaining, 41–2, 47–8,

191collectivism, 218–19Colomer, Dámaso Ruiz-Jarabo, 120colonialism, 22, 154, 158commerce and commercial law, see law;

tradecommunication

information and communication technologies (ICTs), 128, 130–3, 141, 253, 257

political communication (research), 146–9, 163, 168

telecommunication services, 21–4, 27, 31–2, 36–7

communism, 25–6, 154, 158 comparative accounting research, 70–1,

74–5comparative public policy research, 33comparative welfare state research, 261competition

competition in education, 213, 216, 218

competition in healthcare, 196, 224, 227–45

competitive tendering, 45–6, 49competitiveness, 46, 142, 210, 236economic competition and

competition policy, 6, 42, 129, 130, 133–5, 138–9, 198, 224

international and state competition, 21, 33, 70, 77–8, 115, 200–1

compliance, 68, 87–105, 113, 123, 137, 208, 215, 238, 253, 258

see also enforcement; monitoringconservatism, 26, 27, 232, 241

see also political party familiesconstitutions, constitutionalism, 5, 10,

14, 87, 107constructivism, 11–14, 171, 207–8, 210,

257, 259content analysis, see methodscontracts

contracting out, 46Contracts for the International Sale of

Goods, 140employment and collective contracts,

26, 45, 49, 66, 233, 236incomplete contracting, 108,

121, 123relational contracts, 128–33selective contracting, 235, 237, 241,

243–4Convention on Trade in Endangered

Species (CITES), 94, 98–9, 102–5coordination, forms and problems of,

46, 74, 77, 91, 116, 137, 207, 224, 228, 230, 238, 243

see also collective action, problems ofcorporations

private, 20–1, 28, 45public, rise of: 19–27; decline, 27–35,

251–2trans-, multinational, 134, 256

corporatism, 48, 205, 226, 233–8, 244, 259

see also pluralismcorruption, 138, 140, 141cost containment, see austerity policycosts, types of

fixed v. running costs, 24, 130–2transaction costs, 35, 74, 76–8, 259

Council of Europe, 97–8courts

civil courts, 127mercantile courts, 127

Index 307

courts – continuednational courts, 112, 124, 128, 131–2,

137–42, 254international courts, 87–8, 104,

107–11credible commitment, 258, 259crises

corporate crises, 71, 73, 76–81, 83, 260

crisis of the (welfare) state, 12, 167, 189

economic crises: euro currency crisis, 185; Great Depression (post-1929), 25; Great Recession (post-2008), 3, 8, 25, 37, 79, 84, 190, 206, 253, 255, 260; oil crises (1970s), 25, 27, 193, 201, 223, 234, 236, 244

fiscal crises, 37, 253legitimacy crises, 167, 178

critical junctures, 12, 110, 243, 251culture, cultural studies, 70, 73, 75,

78, 146–9, 163–5, 169, 211, 216, 259–60

see also political cultures; political discourse cultures

Dahl, Robert A., 170Daseinsvorsorge, 24, 26–7decentralization, 45, 114, 193, 195,

231–3, 244decision-making

collectively binding decisions, 252consensus v. majority

decision-making, 95–6, 101, 107, 109, 121, 137, 204–5

decision-making v. organizational responsibilities of the state, 8

democratic v. technocratic decision-making, 185

joint decision-making and joint-decision trap, 109, 122, 211, 212

non-decisions, 191, 202decommodification and

recommodification, 193, 194, 199defence policy, see wars and peacede Gaulle, Charles, 24deindustrialization, see industrialization

and deindustrializationdelegation, 87, 89–91, 108, 122, 124,

217see also principal-agent theory

deliberation, 100, 179democracy

advanced (established, Western) democracies, 4, 27, 28, 31, 36, 172, 250

democratic mass societies, 172democratic quality and legitimacy,

167–71, 178–80, 254–5democratization, 93, 98direct democracy, 177–8, 182, 194,

195, 205liberal democracy, 3, 167, 250, 255post-democracy, 255representative democracy, 50, 171,

179, 255Westminster v. consensus democracy,

204–5demographic change, 4, 5, 10, 12–13,

198–9, 207, 225–6, 257, 263demos, 167, 254denationalization, 141, 169Denmark

Europeanization of public spheres and media, 151–2

journalistic practices, 153–62privatization, 29–30, 38social policy: family, 194–5;

health, 196; labour market, 193; pension, 191–3; welfare regime (social-democratic) and its change, 190, 197, 200–5

diplomacy, 87, 94–5, 101, 104discourses

discourse analysis, 168discursive institutionalism, 11–12policy discourses, 209, 213, 214, 220–2see also political discourse cultures

displacement and layering, 254

early modern period, 127, 133Easton, David

authorities, political community and regime, 168

diffuse v. specific support, 168economic constitutions, 127, 133, 135,

139economic exchange, 22, 124, 127–9, 134economic openness, 35, 189, 205economic performance, 27, 206, 215–16,

219economic policy, 200, 215, 255

308 Index

economies of scale, 24, 67, 74, 79–80, 110, 231

economies, types ofbank-based v. market-based

economies, 81–2capitalist market economies, 5, 26, 75,

93, 133command economies, 27industrial(ized) economies, 25,

212–13, 250insider v. outsider economies, 75, 77,

81–3knowledge economies, 219, 220less-developed economies, 25, 130small (developed, open) economies,

190, 200, 250, 255see also capitalism

education (policy)and (public and private, female)

employment, 61, 64–5, 195, 199, 214

internationalization of, 255–6, 258, 260

levels: post-secondary (higher), 63; secondary, 207–22

vocational training, 45, 73–4, 79, 193effectiveness, 20, 41, 121, 125, 130, 132,

168, 170effet utile, 122efficiency, 5, 10, 20, 24, 27, 33, 36, 41,

45, 70, 74, 82, 98, 110–11, 114–16, 125, 131–5, 170, 189–91, 193, 196, 201, 205–6, 223, 225, 227–30, 234–5, 237–8, 242, 252, 254–5, 259, 261

elites, 93, 159–60, 162, 168–70, 172, 190, 210, 213, 216, 254

employment and unemploymentfemale employment, 203full-time and part-time employment,

50–1, 64–5, 199public and private employment, 26,

34, 36, 47–66, 199, 227, 240, 252recruitment, 45, 53, 63self-employment, 50, 194unemployment, 5, 193–4, 198–202,

205, 234, 236, 262energy, 22–3, 26, 244enforcement, 69, 91–2, 95, 102, 103,

108–9, 127–8, 130–3, 136, 138–9, 208, 252–3, 258

see also compliance; monitoring

England, see United KingdomEnlightenment, 127–8, 133Enthoven, Alain C., 229environmental protection, 7, 87, 92, 94,

98–9, 105, 112, 255epistemic communities, 257equality, 42–3, 48–9, 128, 218equilibria, 76, 259Esping-Andersen, Gøsta, 5Europe

continental, 22, 30, 67–8, 182, 197Eastern, 27, 98, 153–4, 158Northern and Western, 30, 49, 200Southern, 29–30

European Commission on Human Rights, see European Convention on Human Rights (ECHR)

European Community Household Panel (ECHP), 66

European Convention on Human Rights (ECHR), 93, 94, 97–8, 103–4

European Court of Human Rights, see European Convention on Human Rights (ECHR)

European identity, 115, 150–1European integration, see European

UnionEuropeanization

of national politics, 172–3, 184, 225–6, 258

of public spheres, vertical and horizontal, 149–52, 254, 258

European Social Survey (ESS), 50European Union

agreements: Bilaterals I and II with Switzerland, 173, 177–8, 182; Schengen, 172–3, 176, 178

directives: Capital Movements Directive, 116–18, 124; Services Directive, 115, 124

Eastern enlargement, 173, 177Economic and Monetary

Union (EMU), 27, 116, 124, 173, 177, 185

European citizenship, 115European employment policy, 193European Commission, 115, 116,

119–20, 123, 124, 238European Community, 109, 112European Court of Justice (ECJ), 94,

107, 139–40, 254

Index 309

European Union – continuedEuropean law, 46–7, 109,

119, 124, 139–40, 238European Union Statistics on

Income and Living Conditions (EU SILC), 66

federalism, 109, 114four freedoms: goods, services

and persons, 111–16; capital, 116–20

information policy, 258legitimacy, 114–15, 167, 176–8,

180, 184mutual recognition, 111–12, 115Single Market Programme, 33treaties: Amsterdam, 173, 177;

Constitutional, 177; Lisbon, 173, 177, 182; Maastricht, 33, 116–20, 124; Nice, 173, 177; Rome, 111; Treaty on the Functioning of the European Union, 109, 116, 139

Troika, 185evaluation, 45, 207–13, 215–17, 229evidence-based policy-making, 211,

215, 221evolutionary economics, 72, 83, 251executives, 179exit and voice, 198, 200, 256exogenous shocks, 12–14, 27, 71, 83,

213, 225, 234, 245, 260experts, expertise, 78, 95–7, 132, 136,

209, 213, 215, 237explanation

causal effects and mechanisms, 10–11, 167, 171, 250–1, 256, 262

covering-law model, 146explanatory heuristic of present

volume: driving forces and modifiers of state transformations, 9–14, 256–64

explananda of present volume, 4, 5–9most likely cases, 190, 205–6necessary and sufficient conditions,

33, 131, 209parsimony, 16, 251, 262–3problems and challenges: causal

heterogeneity, 10; contingency, 10; interdependence of cases, 10; ‘many variables, small N’, 10, 261–2

see also methods

fairness, 42–3, 129, 130, 135, 137, 141, 206

family policy, see Austria; Denmark; New Zealand; Switzerland

Fascism, see Italyfederalism, see Australia; Austria;

European Union; Germany; Switzerland; United States

feedback effects (negative, positive), 108–12, 114–15, 123, 124, 136, 201–3, 216

financial accounting regulation and regimes, 67–84

financial (capital) markets, 67, 70, 73, 75, 77, 116–18, 124, 199, 257–8

Finland, 29, 38, 216, 220–1flexibility, 14, 45, 197–8, 206foreign policy, 101, 156formal modelling, 89Forsthoff, Ernst, 26–7frames, framing (cognitive, normative),

11, 152, 160, 171–2, 180–4, 209–10, 215–16, 234, 257

FranceBank of France, 24colonialism, 154Europeanization of public spheres and

media, 151–2journalistic practices, 153–62legal system (and accounting), 69–70,

76–7manufacturing industries, 25, 31political parties and governments:

de Gaulle (1944–46) government, 24; 1930s leftist governments, 23

privatization, 38(public) corporations: Air France, 24;

Renault, 24, 26(public and private) employment,

47–8, 50, 51, 53, 56–62, 64Franco, Francisco, 23freedom of association, see labour

standardsfree-riding, 259

see also collective action, problems offunctionalism

functional deficits, pressure and adaptation, 10–11, 20, 25, 73, 76, 77, 81, 84, 142, 198–9, 223, 225, 231, 234, 236, 244–5, 256, 259, 263

310 Index

functionalism – continuedfunctional equivalents, 241, 243functionalist fallacy, 11functional spezialization, 47neofunctionalism, 125, 225–6spillover, 125

game theory, 259gender, 42–3, 51, 53, 57, 59, 192, 199General Agreement on Tariffs and

Trade (GATT), 94–7, 103–4, 109, 120, 251, 253

see also World Trade Organization (WTO)German-speaking countries, 31Germany

Bundesrat (Federal Council), 235Bundesvereinigung der Deutschen

Arbeitgeberverbände (Federation of German Employers’ Associations, BDA), 214

courts: regional courts, 142; Reichsgericht (Imperial Court of Justice), 137–8

education policy, 211–17, 255–6, 258, 260


federalism: joint decision-making, 211, 212; Länder (federal states), 211–12, 214–15, 217; Lower Saxony, 24

Gewerkschaft Erziehung und Wissenschaft (GEW, teachers’ union), 214

health policy, 224–5, 234–6, 243–5journalistic practices, 153–62legitimation discourses, 175–84Kultusministerkonferenz (KMK,

Standing Conference of the Ministers of Education and Cultural Affairs ), 212, 214–15

legal system (and accounting), 69–70, 77, 133, 142

legitimation discourses, 175–84local savings banks, 21National Socialism, 23–4‘Pisa shock’, 213political parties and governments:

Christian Democrats, 235; Free Democrats, 235; Grand Coalitions, 235; Social Democrats, 235

privatization, 38(public) corporations: Deutsche

Bundespost, 28, Deutsche Post (AG), 28; Montan Ltd., 24; Reichspost (Imperial Post), 21; Reichswerke Hermann Göring, 24; Volkswagen, 24, 119–20

(public and private) employment, 43, 46–8, 50–3, 56–62, 64

(re)unification, 21, 214Gilbert, Neil, 198globalization

economic, 4, 10, 12–14, 25, 27, 33, 35, 67, 70, 73, 77–9, 81, 128, 141–2, 167, 169–70, 219, 220, 225–6, 255–8, 260, 261, 263–4

globalization-welfare state nexus, efficiency v. compensation hypothesis, 189–201, 205–6

indicators, operationalization of, 172, 185

Global South, 264global warming, 169golden shares, 118–19governance

corporate governance, 81–2global governance, 4, 87–8, 105,

207–9, 216, 251–2, 254, 263good governance, 219multi-level governance, 8, 15private, transnational governance, 4,

128–33, 135, 137, 139–41governments, types of

coalition governments, 234minority governments, 203, 205single-party governments, 203, 205

Great Britain, see United KingdomGreat Depression, see crisesGreat Powers, Europe, 22Great Recession, see crisesGreat Transformation, 20–1Greece, 33–4, 38, 119grounded theory, 152–3, 159guilds and fraternities, 127, 133Guttman scales, 7

Hall, Peter A., 7–8, 249, 252health policy, see Austria; Denmark;

Germany; Italy; Netherlands; New Zealand; United Kingdom; United States

Index 311

Henisz, Witold J., 35hierarchy

and legal systems, 253in accounting regulation, 67in healthcare system regulation, 224,

227, 236–9, 241–4in public administration, 47–8‘shadow of hierarchy’, 236v. market and the organization of

firms, 132, 134‘high v. low stakes’ politics, 105history

end of, 3historical institutionalism and ‘history

matters’, 12, 76, 107historical studies on economic

exchange, 127, 130, 133holism, 213, 224, 245Hong Kong, 222human capital, 195, 204, 208, 210, 213human rights, 92–4, 97–8, 104–5, 109

see also European Convention on Human Rights (ECHR)

hybridization, 9, 15, 68–9, 81, 132, 197, 223–5, 244, 255–7

hygiene, 20

ideal types, 42, 47, 50, 82, 128, 204, 210, 223, 224, 238

ideas, 11–14, 74, 82, 207–11, 221–2, 226, 228, 230, 232–8, 240, 242–5, 257–60, 263

ideologies, 25–7, 34, 46, 77, 83, 198, 203–4, 228–30, 232–3, 238, 244, 259

imperialism, 22implementation, 7, 9, 69, 93–5, 108–9,

136, 208, 211, 215, 226, 245, 252incrementalism, 70–1, 76, 82–3, 204–5,

238–9India, 122, 132individualization, 10, 12–13, 147–8,

225–6industrialization and deindustrialization,

20–2, 25, 128, 131, 167, 198, 200, 250

industrial relations, 26, 94, 99–101information, 70, 73, 75, 80–1, 89–93,

167, 209, 260infrastructures, 10, 20–3, 26, 142innovation, 12–13, 72, 78–9, 110, 238,

243, 257

institutionalism, see new institutionalism

institutionsinstitutional change, reform, 11–12,

210, 218, 220–1, 249, 259institutional design, 77, 88, 93, 120,

184–5insurance companies, 24, 27, 196, 234,

237–41, 244interest groups, 92, 97, 101, 135, 216,

259International Accounting Standards

Board (IASB), 67, 80international administration, 87international agreements, 87–93International Association for the

Evaluation of Education Achievement (IEA), 217

International Chamber of Commerce (ICC), 138–9, 142

international cooperation, 87–93, 97, 104–5, 108–9, 258

International Criminal Court, 87, 109international dispute resolution, 87–105,

138International Financial Reporting

Standards (IFRS), 67–9, 81International Institute for the

Unification of Private Law (UNIDROIT), 140

internationalization (societal, political), 6–7, 9, 11–14, 70, 74, 107–8, 111, 129, 167–72, 184–5, 251–2, 254–60

see also transnationalizationInternational Labour Organization (ILO),

94, 99–105, 251see also United Nations

international law, see lawinternational organizations and

regimes, 4, 8–9, 78, 87, 167, 169, 172, 174–5, 184, 207, 251–4, 257–8, 260

international political economy, 189–90, 250

International Relations theory, 88, 92, 208–9

International Social Survey Program (ISSP), 50

international trade law, see tradeinternational treaties, 90, 93, 108–9,

182, 258

312 Index

International Tribunal for the Law of the Sea, 87

investor protection, 74–5, 78–9Ireland, 21, 30, 38, 119isomorphism, types of: coercive,

normative and mimetic, 71, 73–4, 78, 79, 83, 260

Italyelectoral system, First Republic, 232Fascism, 23, 26political parties and governments:

Forza Italia, 233; Lega Nord, 232(public) corporations: Azienda Generale

Italiana Petroli (AGIP, General Italian Oil Company), 23; Ente Nazionale Idriocarburi, 25; Istituto per la Ricostruzione Industriale, 25

regionalization, 230–2

Japan, 31, 38, 69–70, 76–7, 139Jellinek, Georg, 252Johnson, Lyndon B., 240joint stock companies, 28, 37judicial activism, 117–18, 121, 124judicialization (formal, substantive),

87–105

Keynesianism, 26, 27, 200, 201, 255

labour costs, 45, 194, 199, 201–2labour income, 41–66labour market policy

activation, 193–4, 197–201, 204, 213employability, 194, 197–8flexicurity, 193–4job security, 34workfare, 193, 204–6

labour standards, 99–101languages, 142, 145, 147, 210–11, 254Latin America, 164, 165Latour, Bruno, 148law and legal systems

cartels and cartel law, 138–41case law, 107–16, 120–25, 139civil (procedural) law, 46–7, 81, 82,

128–9, 132–4commercial law, 127–42, 254, 257, 259competition law, 133, 138–9, 238due process, 253‘insider’/’code law’ v. ‘outsider’/

’common law’, 69, 77, 81

international law, 87–8, 101, 104, 107, 108, 128

‘law as a fact’ doctrine, 139law-making and enforcement, 14, 128precedents, 107–11primary v. secondary law, 115private law, 127–42legality, legal security, rule of law, 9,

47, 87–8, 121, 168, 179, 253–4‘shadow of the law’, 97, 128–9transactional law, 127, 133, 135

legitimacydemocratic legitimacy, 128input v. output legitimacy, 170–1legitimacy deficits, 254legitimacy of: European integration,

114–15, 124, 145, 164; trade restrictions, 121

legitimation discourses, 168–9, 172–5, 184–5

Lehman Brothers, 8lex maritima, 135–7, 141lex mercatoria, 127–8, 138, 140, 259liberalism

neoliberalism, 14, 19, 27, 31, 83, 204, 210, 217, 228, 232, 243

ordoliberalism, 127, 133liberalization, 33, 107–8, 116, 124–5,

131, 232–3life worlds, 153lobbying, 80, 123, 135lock-in, 110, 114, 260logic of appropriateness, 11log-rolling, 205London Maritime Arbitrators

Association, 136Lueger, Karl, 21Luxembourg Income Study (LIS), 42,

50, 66

Macau, 222Maduro, Miguel Poiares, 113‘make-or-buy’ model, 134–5

see also vertical integrationmanufacturing industries, 23, 25, 27,

131, 201, 236markets

equity and bond markets, 77market failures, 26quasi-markets, 196, 201, 217, 221, 244world markets, 190, 201, 206

Index 313

mediaforeign correspondents, 152, 165media bias, 177news values, 159–60quality v. tabloid press, 149–52, 159,

162–3, 172, 185Springer press consortium, 147television, 149

methodscase studies, 251comparison, 10, 33, 43, 70–1, 74–5,

93, 209, 212, 217, 219, 250–1, 261–2‘congruence analysis’, 16content analysis, 146, 149, 168eclecticism, mixed-method designs,

16, 262ethnographic approach, 165interpretive approaches, 146, 209–10,

262interviews, 107, 131, 146, 152–3, 208macro-quantitative research, 189observation, 146, 152–3, 157, 165sampling, 102, 173statistical methods: John-Murphy-

Pierce decomposition, 51, 58–61; logit regression, 52–3; Oaxaca-Blinder decomposition, 51, 53; panel data regression, 33; quantile regression, 51, 53–8; time series cross-sectional research design, 261

Mexico, 93Middle Ages, 20, 127migration, 173–4military, see wars and peacemining, 23–4, 27, 36modernization, 25, 44, 46, 49, 62,

198–201, 217, 231monarchy, 19–20monetary policy, 116monitoring, 75, 90–4, 97, 100, 102, 105,

130–2, 215, 218, 252–3see also compliance; enforcement

monopolies, 5, 7, 19–21, 24, 36, 45, 63, 127, 191, 249, 253–4, 263

Monti, Mario, 233more economic approach, 134–5municipalities, municipal government

cities, urban agglomerations, 20–1local government, 20–1municipal services, 26–7municipal socialism, 20, 25

nationalization, 20–6, 36–7, 128, 131, 133

see also privatizationNational Socialism, see Austria; Germanynegotiation

business, 131–2, 136–7interstate, 92, 94–6, 102, 258

neofunctionalism, see functionalismneoliberalism, see liberalismNetherlands

‘Dutch disease’ and ‘Dutch miracle’, 236, 238, 244

health policy, 236–8, 243–5political parties and governments:

Christian Democrats, 237; (Conservative) Liberals, 21, 237; ‘purple coalition’, 237–8; Social Democrats, 237

privatization, 38Wassenaar Accord, 236

networks, 71, 73–4, 79–80, 127–8, 130–3, 146, 167, 174–5, 179, 203, 257, 260

New Economy, 83new institutional economics, 10, 134new institutionalism, 11–12, 88–9, 107,

209, 225, 227, 260New Public Management, 14, 41, 44–6,

48–50, 61–2, 228–9, 231, 235–6, 242, 244, 252

New Right, 218–19see also conservatism

new social risks, 5, 256New York Convention on the

Recognition and Enforcement of Foreign Arbitral Awards, 138, 142

New Zealandpolitical parties and governments:

Labour, 200; New Zealand First Party, 192

privatization, 31, 38Rogernomics, 200social policy: family, 194–5; health,

196; labour market, 193; pension, 191–2; ‘wage earners’ welfare state’ and its change, 190, 197, 200–1, 204

nineteenth century, 20–2, 36, 218non-governmental organizations

(NGOs), 97, 98norms, 12, 90, 93, 97, 100–1, 130, 135,

137–8, 208, 258, 260

314 Index

North America, 164North American Free Trade Agreement

(NAFTA), 93, 173, 226North, Douglass, 74Norway, 21, 22, 29–30, 38Nullmeier, Frank, 184

Obama, Barack, 240occupational groups (and policy

measures for them), 51, 61, 191, 193, 196–7, 202–3

ordre public, 138Oregon Health Plan, 262

see also United StatesOrganisation for Economic Co-operation

and Development (OECD), 3–4, 207–22

parliaments, 69, 131, 170, 171, 185, 258participation, 75, 129, 135, 137, 141,

170, 179, 210–11path dependency, 12, 71, 76, 83, 107,

108, 110–16, 120, 122, 125, 129, 202, 230, 260, 263

peace, see wars and peacepeak associations, 48–9pension policy, see Austria; Denmark;

New Zealand; Switzerlandperformance assessments (measurement,

reviews), see evaluationpersuasion, 208Peters, Bernd, 146–7, 168planning debate, 24pluralism, 259

see also corporatismPoland


journalistic practices, 153–62policy and regime convergence, 5–14,

49, 68–71, 76–83, 108, 116, 119–20, 190–1, 197, 198, 205–6, 226, 235, 252–3, 255–7, 260–1, 263

policy change, 6, 7–8, 15, 197, 198, 202–5, 207, 209, 211, 221, 223–7, 249

policy diffusion, 230, 245, 257, 259policy entrepreneurs, 209policy learning, 11, 190, 260policy legacies, 198, 201, 203, 263political cultures, 259

political discourse cultures, 146, 147, 163–5

see also discoursespolitical elites, 168–70, 172, 190political party families

Christian democrats, 203–4, 235, 237liberals, 21, 237social democrats, 26, 34, 234–8

popular sovereignty, 170, 179Portugal, 29, 38, 119postal services, 21, 27, 31–2, 36–7post-national constellation, 4, 167,

251–2poverty, 193, 199, 206principal-agent theory, 45, 108, 123,

124, 254, 258see also delegation

privatization, 6–7, 9, 10, 13, 19, 27–38, 41, 45, 129, 191, 201, 204, 226, 232, 242–3, 251–3, 255–7, 260

productivity, 51, 53, 58–60, 208, 210, 213, 219, 227, 233–4, 238

professional organizations, 67, 79Programme for International Students

Assessment (PISA), 207–22, 255see also Organisation for Economic

Co-operation and Development (OECD)

prosperity, 213–14, 216protectionism, 200–1Prussia, 47public administration

administrative traditions and employment regimes: Anglo-American, 46–7; German, 47–8, Napoleonic, 48, Scandinavian, 48–9

bureaucratic regulation, 50, 170, 252public employees (civil and public

servants), 8, 26, 41–3, 47–9, 66, 98, 192

public debt, 5, 27, 33–5, 82, 194, 200

public enterprises (utilities), 19–39, 118, 194, 201

Public Entrepreneurship Index, 28–9, 37–8

public goods (interests), 4, 8–9, 112, 129, 130, 133, 135, 137–41, 249, 252–9, 263

public pay policies, 42–4, 62

Index 315

public revenues, 19, 31, 198–9public service provision, 20, 31, 41–2,

45–6, 48–9, 63public spheres (national, European),

145–52, 157, 159, 163–4, 168–9, 172, 175, 177, 185, 254, 258, 260

Puerto Rico, 139

race to the bottom, 6, 7, 190, 199, 201, 255–7, 263

railroads, 21–2ratchet effect, 205rational-choice approach, 11–12, 212,

259recessions, see crisesRechtsstaat, see law; state(re)distribution, 82, 115–16, 191regime support, 168, 172regulation and deregulation

deregulation, 193, 199, 257healthcare regulation, 223–45social regulation, 7, 129–30, 137–40

rent-seeking, 76, 234representation, 26, 47–8, 50, 97–100,

130, 133, 135, 136, 167, 169–70, 179, 185, 232, 255

reputational networks, 127–8, 130–3 retrenchment, 6, 9, 191, 194, 201,

203–5, 261–2risk diversification, 199ritualization, 158, 162, 165routines (routinizing, Veralltäglichung),

153, 156–7Russia, 101, 154, 156

sanctions, 89–90, 92, 94–103, 127–8, 131–2

scandals, 73Scandinavian countries

administrative traditions, 48–50public enterprises and privatization,

30–1Scandinavian Airline System (SAS), 24

Scharpf, Fritz W., 109, 170, 212security

external, 5, 7, 9, 25, 170, 178internal, 5, 7, 9, 25, 88, 94, 101–2,

104–5, 169self-interest, 11, 89, 110, 125, 241self-regulation, 69, 77, 135–6, 224, 236self-reinforcing processes, 12, 108

self-transformation (of the state), 10, 71–2, 83–4, 263

seniority, 41, 48separation of powers, 109shareholders and stakeholders, 28, 74–5,

81, 129–30, 136, 140, 141, 208, 213, 215, 240–2, 245

shirking, 259Singapore, 185skills, 46, 195, 198, 200, 207–8, 217, 219social cohesion, 22, 27, 210, 212–14, 221social justice, 5, 130, 218social policy

childcare, 194–5long-term care, 196–7, 199, 205, 236,

262male breadwinner model, 199means-testing, 192–3, 195social assistance, 194social insurance, 192, 196, 203, 230,

243social rights, 193, 204

software industry, 129–33solidarity, 115, 196, 206sovereignty, 5, 8, 87, 107, 117, 167, 169,

249, 251–2, 260Soviet Union, 25–6Spain, 23, 25, 29, 38, 119special interests, 129, 135, 170stagflation, 27standard setters, 67–9, 76, 79–80, 84,

229, 231, 233states

‘container state’, 9constitutional state, 5, 87, 107democratic nation state, 3, 167–85,

249, 254–5enabling state, 198end (retreat) of the state, 3–4, 9, 33,

35, 36, 191, 249, 252, 256state failure, 227, 228, 230–1state-/nation-building, 22territorial state, 5, 7, 249, 252TRUDI state model and its (resource,

law, legitimacy, welfare) dimensions, transformations, 5, 6–7, 9–11, 42, 44–6, 49, 62, 249–64

‘statists’ and ‘post-statists’, 249Steinmeier, Frank-Walter, 154stock exchanges, 67, 77strategic action, 11, 210

316 Index

strikes, 47–8, 124see also industrial relations

subsidiarity, 212subsidies, 27, 33, 122, 192, 238supply-side orientation, 191, 198–200,

206supranational arrangements, 129–30,

133, 135, 137, 139–42, 145, 147, 167, 170, 185, 258–9

Swedennationalization and privatization, 21,

22, 25, 26, 29, 38(public and private) employment,

47–8, 50, 51, 53, 57, 59–61, 65Switzerland

and the EU, 173, 176federalism: cantons, 195, 204–5legitimation discourses, 175–84privatization, 29–30, 38referenda, 177–8, 182, 192, 195, 205social policy: family, 194–5; health,

196–7; labour market, 193–4; pension, 191–2; welfare regime and its change, 190, 197, 200–5

taxation, 7, 20, 33, 45, 51, 69–70, 114–15, 117–19, 170, 192, 194–5, 200, 206, 227, 238

terrorism, 169Thatcher, Margaret, 218–19, 228–9trade

barriers, 120, 128, 169, 200duties and tariffs, 128, 193international trade law, 120, 260intra-firm trade, 133–5maritime trade, 135–7trade openness, 33–5, 190

trade unions, 25–6, 34–5, 41–2, 46–9, 60, 100, 115, 204, 234, 236, 238, 240, 259

transparency, 45–6, 130, 179, 255transportation, 20–2, 24, 128Transatlantic Trade and Investment

Partnership (TTIP), 255transnationalization, 6, 9, 12–13,

127–42, 145–65Trends in International Mathematics

and Science Study (TIMSS), 212tripartism, 99–100twentieth century, 3, 22–3, 25, 27, 218

uncertainty, 73, 79, 81, 93, 102, 108, 134

unemployment, see employment and unemployment

United KingdomBank of England, 24Care Quality Commission, 229Civil Service, 218Department for Children, Schools and

Families (DCSF), 220Department of Health, 229education policy (England), 217–21Generally Accepted Accounting

Principles (GAAP), 81health policy (England), 227–30legal system (and accounting),

69–70, 77legitimation discourses, 175–84Monitor, 229National Institute for (Health and)

Clinical Excellence (NICE), 229Office for Standards in Education,

Children’s Services and Skills (OFSTED), 220

political parties and governments: Conservatives, 25, 217–19, 227–30; (New) Labour, 217–19, 229–30

(public) corporations: British Petroleum (BP), 23; Cable and Wireless, 24; Rolls-Royce, 25; Rover, 25

Qualifications and Curriculum Authority (QCA), 220

regions: Northern Ireland, 219; Scotland, 219; Wales, 219

Universities UK, 220United Nations

Charter, 101–2, 105sanctions, 102Secretary-General, 105Security Council, 14, 94, 101–3veto powers, 101–2

United StatesAmerican Hospital Association, 240anti-trust legislation, 25corporations: Enron, 78; Worldcom,

78federalism: federal government, 21,

239, 241; federal states, 241; State of New York, 139

Index 317

United States – continuedfederal legislation and policy: Great

Society programme, 240; Sarbanes-Oxley Act, 78; Social Security Act, 239–40; US Racketeer Influenced and Corrupt Organizations (RICO) Act, 140

Financial Accounting Standards Board (FASB), 80

health policy, 239–42independence, 21Interstate Commerce

Commission, 25legal system (and accounting), 69–70,

77legitimation discourses, 175–84political parties: (Southern)

Democrats, 240; Republicans, 240–1(public and private) employment, 43,

45–7, 50, 52–3, 57–8, 60–2public lands, 21Supreme Court, 139, 241

urbanization, 20

values, value orientations, 12–14, 75, 79, 82, 147–8, 185, 213, 226, 263

vertical integration, 130, 133–5, 241, 243vested interests, 136, 259veto players (points, positions, powers),

12, 14, 34–5, 101, 191, 205, 216, 234, 242, 245

wars and peaceAllied Forces (World War II), 24Cold War and post-Cold War era, 3,

36, 101

Iraq War, 185mass conscription and warfare,

22, 36military, 22–4, 26, 36munitions industry, 23–4‘war socialism’, 23World Wars: First, 23, 256; Second, 3,

4, 19, 23, 26, 154, 239welfare regimes, types of

Bismarckian, 197, 202conservative, liberal, social-

democratic, 190residual v. institutional, 75–6, 82–3‘wage earners’ welfare state’, see

New ZealandWeber, Max

bureaucracy, 41, 47monopoly on the legitimate use of

coercion, 5‘neo-Weberianism’, 49–50, 62Veralltäglichung (routinization),

156, 165Verstehen (interpretation), 146

Williamson, Oliver E., 134Wendt, Alexander, 210windows of opportunity, 12, 211, 215World Bank, 191

see also Bretton Woods systemworld regions, see Africa, Europe, Latin

America, North AmericaWorld Trade Organization (WTO), 92,

94–7, 103–4, 108–10, 120–3, 125, 226, 253, 254, 258, 260

Zagreb, 153zero-sum games, 8, 252–3