This special issue about sectoral governance in the shadow of hierarchy focuses on two sets of questions. Firstly, do new modes of sectoral governance in themselves contribute to the efficacy of policymaking or do they require the shadow of hierarchy, i.e. legislative and executive decisions, in order to deal effectively with the problems they are supposed to solve? And, secondly, what are the institutional links between sectoral governance and territorially bounded democratic governments? How do different links contribute to the efficacy of policymaking and how do they change over time? Is there a retreat of government from policymaking and a corresponding increase of sectoral governance, or just the opposite?

Promising somewhat more than anyone expects to be delivered remains ingrained in international agreements, clouding their expected aggregate outcomes and how to assess the Parties’ performance. This persistence is explained by systematic overpromising being predictable and, up to a point, productive. I characterize this regime and its consequences and provide an empirical application to the Kyoto Protocol. Overpromising by governments or Parties can be part of a sustainable strategy for electoral success, and varies with socio-economic determinants that characterize the group regime. Thus targets need to be adjusted for regression-predicted overpromising to reveal the rationally-expected outcomes and individual countries’ performance is best identified by deviations of outcomes from their adjusted rather than the agreed targets.

The integration of immigrants is an intractable policy controversy in Dutch politics: the Blok Committee was established by Parliament to offer a resolution. However, its evaluation study ‘Building Bridges’, itself became controversial. This paper asks: Why did the policy evaluation of the Blok Committee become so fiercely contested? We argue that the debate on immigrant integration can be characterized by frame-conflict: there were fundamental differences in how immigrant integration was defined and normatively interpreted by actors. The resolution of such ill-structured problems requires the critical articulation of multiple and conflicting frames. In situations of intractable policy controversies, policy evaluation should reach beyond mere technical and contextual levels to include systemic and ideological discourse. Policy evaluation can thereby focus more on utilization and contribute to the resolution of intractable policy controversies by building bridges among conflicting frames.

Governance has become one of the central concepts in political science, but what is absent is the question: Which modes of governance produce which policy output? This paper develops a classification scheme for modes of governance in all dimensions of public policy and then applies it empirically in four Austrian case studies concerning higher education and innovation. We extend the scholarly discussion on governance to the factor interests and argue that this analytical factor needs to be taken into account in future research in order to understand the modes of governance in policy processes.

In 2000 a Committee of Wise Men chaired by Alexandre Lamfalussy, former president of the European Monetary Institute was appointed by the Economics and Finance Ministers Council to make recommendations on the regulation of the European securities markets. It proposed a four-level system to improve the legislative process while ensuring what it called a democratic and institutional balance. Our paper questions to what extent the concepts of two basic modes of delegation – agency and trust relationships – are appropriate tools to interpret the new structure set up by the Committee. It formulates hypotheses about its policy effectiveness and the balance of power between Community institutions. Evidence supports the agency hypothesis: the Lamfalussy process has reduced the average time taken to negotiate and adopt the first framework directives at level 1 and it has facilitated the removal of bottlenecks in the process through parallel working at levels 1 and 2. In this sense, delegation has enhanced policy effectiveness in the securities sector. But it is much more difficult to assess the trustee hypothesis: that is, whether the Commission and the Committee of European Securities Regulators (CESR) in fact act as trustees of the member states for the benefit of market actors. For the time being, whether CESR might evolve into a European securities regulator remains an open question.

Private arrangements are framed by a set of institutional rules, either public policies or property rights that actors activate in order to defend their positions. This is particularly visible in the field of the environment where human pressure is increasing scarcity and generating rivalries between competing users. How do rules intervene in the resolution of rivalries? I suggest that users activate rules to assert their rights against their rivals and find out a solution to the rivalry. Three hypotheses follow: the owner uses his property rights; the non-owner activates a public policy that acknowledges him as the final beneficiary; and the owner activates a public policy if he cannot exclude the rival from his property. The empirical test, carried out on four cases of local water rivalries in Belgium and Switzerland, validates these hypotheses and shows that public policies are more frequently activated than is initially expected.

During the 1990s, some OECD countries succeeded in reducing their budget deficits. The average public debt ratio fell from more than 70 per cent of GDP in 1996 to about 63 per cent of GDP in 2001. Up to now, researchers have mainly focused on the economic effects of these consolidation efforts. This paper answers another question: How can balanced budgets be achieved? By means of a detailed review of nine budget consolidations, the study identifies different roads to successful fiscal adjustments, starting with a critical review of the definition of budget consolidation. We find a pattern on the expenditure side that follows different worlds of the welfare state. On the revenue side however, the tax structure seems to be more path-dependent and mainly driven by long-term developments. In the last section, we show that institutional reforms constitute very important components of budget consolidations.

European networks of regulators in industries such as telecommunications, securities, energy and transport have been cited as important examples of the growth of network governance in Europe. Using a principal-agent perspective as a starting point, the article examines why a double delegation to networks of regulators has taken place. It looks at how and why the European Commission, national governments and independent regulatory agencies have driven the creation of networks, their institutional character and their implications for regulatory governance in Europe. It argues that problems of co-ordination were the main factor advanced to justify establishing networks of regulators. The new networks have been given a wide range of tasks and broad membership, but enjoy few formal powers or resources. They are highly dependent on the European Commission and face rivals for the task of co-ordinating European regulators. Thus in institutional terms the spread of network governance has in fact been limited.

The EMU fiscal adjustment paths of the four Southern Europe members (Italy, Spain, Greece, and Portugal – SE-4) vary along two dimensions: (a) cross-temporal pre- and post-EMU accession and (b) cross-country. We account for the cross-temporal variation by distinguishing between the ‘hard’ and ‘soft’ EMU conditionality of the pre- and post-accession stage. External constraints in the form of the Maastricht eligibility criteria constituted a significant common ‘push’ factor in the fiscal stabilization process of EMU candidate countries throughout the 1990s. However, their power does not necessarily lead to fiscal sustainability as demonstrated by the post-accession budgetary outlook of the SE-4. We account for the cross-country variation by introducing additional ‘pull’ factors related to the reform content, context and capability, such as unemployment, the level of social concertation, and government effectiveness. Only in cases where such factors were at work did governments engage in structural reforms to consolidate public finances instead of the less controversial path of macroeconomic policy reform.

Why do German policymakers support some aspects of a single European pension market, but not others? This article argues that the German government’s preferences towards European Union (EU) pension directives are best explained by combining historical institutionalism (HI) and domestic discourse analysis (DA). Each approach by itself is insufficient to account for the observed variation between 1991 and 2007. Arguments based on party ideologies offer less explanatory power. HI explains why all governments – Kohl, Schröder, and Merkel – protected employer-sponsored book reserve pensions, a cornerstone of Germany’s coordinated market economy, from the scope of EU directives. DA allows us to grasp how interests were reframed. While the status quo stance of the Kohl government succeeded in delegitimizing supporters of alternative pension security concepts, the Schröder administration imposed an economically efficient pension reform without much public support. The grand coalition, in turn, abandoned Chancellor Merkel’s initial plan to expand second-tier pensions in the light of rising pressures that the Left Party posed for the Social Democratic coalition partner.

This case study asks whether delegated, sectoral governance by private actors and arm’s-length agencies enhances policy efficacy or does sectoral governance require a shadow of hierarchy cast by government actors to deliver desired policy results? EU energy market liberalisation shows that sectoral governance successfully mobilises regulatory expertise, capacity and legitimacy and delivers workable norms and rules for market transactions in a complex policy environment. However, it also finds that the efficacy of sectoral governance mechanisms is constrained by distributive conflicts between different national jurisdictions and sector interests. If deadlock occurs, the European Commission as governmental principal casts a double shadow of hierarchy over sectoral governance agents: the threat of further legislation and of EU competition law. While both instruments enhance policy efficacy, they cannot substitute for the intrinsic rule-making qualities of sectoral governance: governance and government play complementary roles in the policy process.

This paper analyses the institutional framework of the Spanish electricity and gas markets from their emergence at the beginning of the twentieth century until the liberalisation process encouraged by the European Union. European processes of liberalisation involving the introduction of regulation and competition and the application of non-hierarchical modes have raised the number of both public and private actors taking part in sectoral governance. However, none of these modes is new for the sector. A historical perspective shows the conditions under which the threat of governmental intervention and the discretion granted to sectoral governance differed significantly between sectors. While the threat to nationalise and monopolise the electricity sector contributed to the creation of a private agent and a model of self-regulation with a large measure of discretion, in the gas sector the public presence was strong and control tight. Thus, the paper concludes that one should not presuppose that old modes of governance are strongly governmental and hierarchical. The opposite proves to be the case in the Spanish electricity sector, where new modes of governance are now more linked to hierarchy.

In technically complex areas, political actors increasingly rely on private actors to shape public policy, due to the greater expertise of private actors. This article theorises and empirically investigates the conditions under which self-regulation by industry (governance) emerges in environmental policy at the European level and asks how effective it is. Is a shadow of hierarchy (governmental intervention) needed to ensure the emergence and effectiveness of voluntary agreements? We show that the willingness to engage in self-regulation is prompted by the threat of governmental legislation. Once legislation has been pre-empted, environmental self-regulation is implemented under a weak shadow of hierarchy. We identify the causes of this weak control and explain the differential performance in the two sectors on the basis of different market incentives.

From a traditional rationalist principal-agent framework, the development of the European Community’s competition policy could appear as a straightforward story of agency loss. However, the recent overhaul of competition policy, which the Community presented in terms of decentralisation, appears to have changed the story. We are confronted with the uncommon event of an agent (the European Commission) returning some of its powers to the principals (the member states). This paper resolves the puzzle by highlighting the role of the Commission and of European courts. It has become part of the Commission’s strategy to pursue its objectives through legally non-binding instruments such as notices or guidelines or co-operation in networks. These instruments do not need the approval of the Council of Ministers or the European Parliament. With the Commission’s promotion of new modes of governance, the link between sectoral governance (in terms of regulation specific to competition policy) and the governmental shadow of hierarchy shifted to an increasing extent to judicial review by European courts. Alongside this shift, the character of judicial review has changed in the direction of judicial control, as European courts no longer restrict themselves to review of the legality of Commission actions, but also engage in assessing the facts themselves.

The European social dialogue provides for the signing of collective agreements between employers’ associations and trade unions organised at the European level. Effectiveness to a great extent depends on the shadow of hierarchy, which is cast by the threat of legislative action and by ensuring implementation of collective agreements through public intervention. The need for the shadow is illustrated by the initial priority given to statutory agreements and the problems of implementation of more recent non-statutory agreements. While the shadow of hierarchy is important to ensure the effectiveness of social dialogue, social dialogue procedures are not characterised by strong principal-agent relationships. In particular, non-statutory agreements stem from a bottom-up private sector-inspired tradition of industrial relations. Even in the case of statutory agreements, the European Commission, as principal, does not appoint the agent and the delegation is implicit rather than explicit. Moreover, successful delegation entirely depends on whether the agents reach agreement between themselves. While the Commission could revoke delegation if Community objectives are not realised and by setting statutory criteria for implementing an agreement, its room for manoeuvre is limited for reasons of political pragmatism.