"Cheap Talk or Credible Signals? Economic Interests and the Construction of a Single Pension Market in Europe"

Hennessy, Alexandra. (2007) "Cheap Talk or Credible Signals? Economic Interests and the Construction of a Single Pension Market in Europe". In: UNSPECIFIED, Montreal, Canada. (Unpublished)

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Abstract

This paper asks why the EU member states were able to agree on a single market for pension funds in 2003 whereas they had failed to do so in several previous attempts (1991-2002). The main argument is that the single pension market was a desirable project before 2003, but bargaining inefficiencies prevented its realization. This is because bargaining over integration in this sector requires credible signaling be- tween the political actors in the member states. More specifically, the coordination of divergent welfare and financial regimes depends on the ability of governments to send costly signals that only a limited range of outcomes are considered legitimate solutions at home. In turn, the capacity to signal and the costs of bluffing hinge on international pressure for pension reform (European Monetary Union) and the magnitude of changes governments have to make to their respective welfare-finance arrangements. The difficulty of reaching consensus on this EU directive was significant and the level of integration accomplished varies across issue areas. The knowledge of how it was done may shed light on the mechanisms supporting or inhibiting the coordination of divergent regulatory regimes more generally.

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