Deep Economic Integration and State Capacity: The Case of the Eastern Enlargement of the European Union
It remains under-appreciated that deep economic integration (which goes beyond free trade agreements) can induce powerful actors to support increasing general state capacities in less-developed countries. In this paper we ask: under what conditions can deep economic integration yield increases in state capacity? We measure institutional change in 17 Eastern and Central European countries (EU membership candidates) exposed to similar challenges of deep integration and find large variation in the evolution of state capacities. To understand this variation, we put forward a conceptual framework stressing three main areas (judiciary, bureaucracy, and competition policy) and supporting a set of hypotheses based on the ideas of Montesquieu, Weber and Smith, respectively. From testing these hypotheses, we empirically identify key relationships and specific reform implementation sequences. Our main result is the centrality of an intricate relationship between bureaucratic independence and judiciary capacity as a main driver of institutional change.