Abstract
This article analyses the transformations of state policies in the European Union and explores the patterns of their convergence or divergence in the context of increased economic transnationalization. The starting point is the thesis that in the globalized, post-Fordist economy welfare states are transforming into Competition States concerned primarily with increasing the competitiveness of their territory and aiming at labour recommodification rather than decommodification. The article offers an operationalization of the concept of Competition State and uses cluster analysis to examine to what extent different European states converged on this model from mid-1990s to 2007. The results show that Eurozone members over time converge to a single cluster that is less oriented towards increasing competitiveness than are the states outside of the EMU, while the latter indeed experience transformations towards Competition States. However, rather than finding a single ideal-type, the analysis actually identifies three different types of Competition States.
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Notes
Czech Republic, Poland, Hungary and Slovakia.
Owing to the lack of available data, Greece, Luxembourg, Cyprus, Malta and Croatia are excluded from the analysis.
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Acknowledgements
I am most grateful to Dorothee Bohle, Laszlo Bruszt, Martin Kohli, three anonymous reviewers, as well as four jury members of the CEP/CES-GPE 2014 Early Career Scholar Prize for their suggestions and critical comments on the earlier versions of this article.
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Appendix
Appendix
Descriptions and sources of variables
EPL – Employment Protection Legislation – the average of three subindices: a difficulty of hiring index, a rigidity of hours index and a difficulty of redundancy index. All the subindices have several components and assign values between 1 and 6, with higher values indicating more rigid regulation. Source: OECD and Romih and Festic (2008).
ALMP – share of expenditure on active labour market policy (active labour market programmes and labour market administration) in total labour market policy in the year 2007. Source: OECD, Social Expenditure Database and Eurostat.
Unemployment Benefit generosity – expenditure on passive labour market policies as a share of GDP adjusted for the unemployment rate. Source: Eurostat.
Education – total government education spending as percentage of public expenditure. source: Eurostat.
Social expenditure – total social expenditure as a share of GDP. source: OECD and Eurostat.
Revenue – total tax revenue as a share of GDP. source: Eurostat.
Tax – effective average tax rate on corporate income expressed as a proportion of the net present value of the income stream (excluding the initial cost of the investment). Source: Devereux et al (2008). It is derived by considering hypothetical investment and calculating the proportional difference of the net present value of a profitable investment project in the absence of tax and its net present value in the presence of tax. It is thus considered the best indicator for tax system attractiveness from the point of view of competitiveness (Deveraux et al, 2008) and it is also more appropriate than indicators based on actual tax revenues, since to the extent that ‘competitive’ tax regimes succeed to attract investment, one would expect higher revenues from corporate taxes in these regimes.
VAT – share of VAT in total revenues. source: Eurostat. An alternative and perhaps better measure would be actual VAT rates; however, since in many countries VAT rates are differential and the scope of products subject to lower VAT rates greatly varies using tax rates would not give an accurate comparison among states.
Aid – state aid granted for horizontal objectives as a share of GDP. source: European State Aid Scoreboard.
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Vukov, V. The rise of the Competition State? Transnationalization and state transformations in Europe. Comp Eur Polit 14, 523–546 (2016). https://doi.org/10.1057/cep.2016.20
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DOI: https://doi.org/10.1057/cep.2016.20