EU funds, state capacity and the development of transnational industrial policies in Europe’s Eastern periphery

Medve-Bálint, Gergő and Šćepanović, Vera (2019) EU funds, state capacity and the development of transnational industrial policies in Europe’s Eastern periphery. Review of International Political Economy . pp. 1-20. DOI

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Many have claimed that in the dependent market economies of Central and Eastern Europe industrial policy has been reduced to incentives to foreign investors – a feature accentuated by their loss of policy space through integration into the European single market. In this paper, we offer an alternative view by arguing that the European Union (EU) has in fact made it possible for its members to recover a degree of policy space lost to economic and regulatory integration. The EU does this through transnational industrial policy, which is the combination of its competition and cohesion policies. The former limits cross-country competition for capital; the latter provides additional resources to support a more inclusive industrial policy benefiting small and medium enterprises (SMEs). However, effective utilization of transnational industrial policy depends on domestic state capacities. We demonstrate this by comparing the distribution of EU funds to automotive firms in Poland and Romania. In Poland, efforts to create institutions that promote SMEs have resulted in a more balanced distribution of EU resources, while in Romania a weak and unstable institutional environment led to their greater concentration, thereby reducing European funds to another source of rents for the most powerful firms.

Item Type:Article
Uncontrolled Keywords:dependent market economies, EU funds, transnational industrial policy, upgrading, automotive industry, Central and Eastern Europe
Subjects:International economics
International relations
Funders:MTA Post-Doctorate Research Program of the Hungarian Academy of Sciences
ID Code:5630
Deposited By: Veronika Vitéz
Deposited On:23 Apr 2020 17:57
Last Modified:23 Apr 2020 18:35

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