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EU Economic Governance and Globalization

Edited by Miriam L. Campanella and Sylvester Eijffinger

It is through a gradual evolution, rather than by grand design, that the somewhat fragmented economic policies of the EU now appear to be heading towards a rather more robust and coherent economic governance. EU Economic Governance and Globalization considers the following crucial question as the EU enters its final stage of institution-building; will the economic institutions of the EU push ahead to reform its rigid national economies and open them up to globalization and international competition?
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Chapter 2: EU governance under duress? Tax policy coordination under globalization

Mehmet Ugur


Mehmet Ugur INTRODUCTION One of the issues in the debate on globalization is the extent of policy arbitrage caused by cross-border mobility and the impact of this arbitrage on the quality of governance. This chapter aims to contribute to the current debate by developing and testing a political economy model of the relationship between globalization and governance quality. The proposed model assumes strategic interaction between the state and non-state actors in a world divided into jurisdictions that compete for the loyalty of the non-state actors. It predicts that globalization, understood as increased cross-border mobility of the non-state actors, does not necessarily undermine governance quality provided that the policy issues are transparent and divisible. We define governance as the supply by a public authority of rules, procedures and codes of conduct that regulate the interaction between state and non-state actors. The quality of governance is defined as the extent to which the public authority supplies these public goods in an efficient and non-discriminatory manner. In this context, governance quality is an indicator of the extent to which the public authority is not captured either by state bureaucracy or by non-state actors. (For similarity and differences between this definition and others discussed by the EU Commission and the European Bank for Reconstruction and Development, see European Commission, 2001; Hellman and Schankerman, 2000). One strand in the globalization and integration debate argues that increased cross-border mobility would lead to policy arbitrage between jurisdictions. Policy arbitrage entails convergence, which...

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