European integration and special interest politics

The first chapter surveys the recent political economy literature on countries' incentives to form international unions and/or to disintegrate in smaller jurisdictions. The main factors that affect these incentives are: (i) economic integration; (ii) the international order; (iii) international spillovers; (iv) the institutional setting. Some implications are drawn for the current debate in Europe on the political effects of economic integration, on the enlargement process and on the distribution of prerogatives between the EU and national governments.; Chapter 2 studies the enlargement of the European Union to Central and Eastern Europe. Political economy models of international unions suggest that large and rich countries have little economic incentive to integrate with smaller and poorer countries. We challenge this view by presenting a formal study of economic influence by special interest groups in an international union. We first show that countries where more groups are organized to lobby gain from political integration on economic grounds. The reason is that a more organized country, under a political union, can affect policies in the other country to its advantage, something that a less organized country can do to a lesser extent. We then argue that richer countries will tend to have more organized interest groups before political integration and show that this will continue to be the case afterward. Hence, the model implies that there are costs and benefits of EU Enlargement in addition to those suggested by the existing literature.; The third chapter presents a positive theory of centralization of political decisions in an international union. The central claim is that lobbies play a role in determining the assignment of competencies to the union because their welfare can increase or decrease under centralization. In equilibrium the allocation of prerogatives between the international union authorities and national governments can be influenced by lobbying activity. Moreover the model shows that centralization does not necessarily decrease distortions created by special interest politics and that these distortions are lower if centralized policies are assigned to a union government rather than to a council formed by national governments.