This dissertation contains three essays on economic transition and institutional change in Central and Eastern Europe. The first paper analyzes patterns of economic coordination in Estonia and Slovenia, two post-socialist countries in Central and Eastern Europe, and argues that Estonia and Slovenia are good examples of liberal and coordinated market economies as defined in the Varieties of Capitalism literature. The main focus is on industrial relations and wage bargaining, but other areas studied by this literature are considered as well. The paper also explores the origins of these institutions by examining the interaction of inherited institutions and strategic policy choices, esp. the effects of privatization and monetary policy on formalizing coordination. The chapter also considers some general implications of this analysis for the study of post-socialist transition and comparative capitalism. The second paper seeks to explain the diversity in economic governance and industrial relations across the eight transition countries that became members of the EU in 2004. It argues that three different models of economic governance emerged in the 1990s—a liberal market economy model associated with pluralist interest representation), a coordinated model associated with corporatist interest representation) and a mixed model, in which social pacts played a significant role. The paper accounts for this variation by developing a theory based on networks. It seeks to demonstrate that two factors—the degree to which the communist system fostered horizontal network ties and the degree to which ownership reform preserved and promoted network ties—can account for the type of economic governance prevalent in each country. The four case studies of Slovenia, Hungary, the Czech Republic and Estonia are used to explore the causal mechanisms. The third paper examines the development of trade policy in Poland and Estonia from the early 1990s until EU accession in 2004. The paper also develops a typology of historical sequences based on two dimensions—extraordinary politics and path breaking—to categorize the policy evolution and processes of change in these countries. It examines why both countries liberalized trade during a period of extraordinary politics at the outset of the transition process, but why this only led to a critical juncture and sustained liberalization in Estonia. The paper suggests that policy change during periods of extraordinary politics are best understood by examining the structure of executive politics and the process of preference formation, whereas the sustainability of trade policy reform is best understood by analyzing interests and institutions.

Local economic development may be defined as increases in the “local economys capacity to create wealth for local residents.” With current unlimited competitiveness in the international market, cities have become not only a place to produce goods but also a spatial consideration for current and future workers everyday lives. However, not every city can achieve its desired economic success, and the pathways toward economic prosperities are diverse. How to accomplish the desired level of economic development and what to develop are two different but intertwined issues that should be understood based on political, economic, and social conditions in localities. Variations in local economic development have been explained by the international, national, and local contexts. These political and economic contexts are shaped by the nation states political structure, the structure of industry in localities, and determining local governance structure. What are the determinants of the type of local economic development in the manufacturing industry cities in different political settings? This research focuses on the impacts of political and economic contexts of cities and their local economic development pathways, conducting in-depth case studies of industrial cities in the United States and South Korea: the City of Detroit, the City of Pittsburgh, Ulsan Metropolitan City, and the City of Pohang. The research is validated by the process-tracing method with document research and archive research, including various years of government reports, organizations special reports, annual White papers, census data, and each citys statistical data. Determinants of local economic development in two different political settings can be understood with international market force, characteristics of political institutional structure, and the role of asset specificity in the region. International market change provides a more direct impact on a single dominant industry-oriented city such as Detroit than on cities of fragmented industry structure like Pittsburgh. Korean cases show a mixed picture of interplay among international market forces, national government, and industry structure, which differs from the United States. While the decentralization process in Korea provides positive opportunities to enhance the local capacity to Ulsan Metropolitan City for overcoming the international marketforce, the same process can be a constraint in the city of Pohang due to its single dominant industry structure. The nature of national political institutions influences the variation in local economic development patterns. In general, the federal system as compared to a unitary system) tends to create more competition among local governments for government resources. With the insight of transaction cost approach, characteristics of asset specificity in a region explain the diverse impact of each asset specificity in the region. Level of asset specificity plays a negative role in the local governments flexible decision making on local economic development. Traditionally, in top-down development approaches and bottom-up development approaches— but even bottom-up development approaches— it is hard to ignore the role of the higher level of governments. Some localities more rely on the higher level of government support in order to reorganize and enhance the local economy. Asset specificity is not fixed and constantly transforms based on the mobility of capital and labor. If asset specificity is high in a region, firms do not want to move from the region unless they are willing to accrue substantial cost, and thus asset specificity becomes a strong bargaining tool when the relationship with local government needs to be negotiated. In the case of the developmental state, asset specificity in certain a locality is heavily embedded over time due to the national economic development plan. For example, Ulsan and Pohang had been designated as “targeted” growth poles for national economic development over three decades with specific manufacturing industries such as automobile, petrochemical, shipbuilding, and steel industry.

When Marquis Childs published his book The Middle Way in 1936, he laid the foundation that inspired the quest for an efficient welfare state. The Folkhemmet, or “peoples home,” initiated by the Social Democrats symbolized the “Swedish Way” and resulted in a generous, redistributive welfare state system. By the early 1970s, experts marveled at Swedens performance because the Swedish model managed to produce the second-wealthiest economy as measured by per capita GDP with virtually no cyclical unemployment. This dissertation demonstrates that capitalist and pre-industrial cultural forces dominated Swedish economic policy development throughout the years that the Social Democrats constructed Folkhemmet. The Swedish economy operated as a variety of capitalism that infused unique traditional cultural characteristics into a “feudal capitalism.” The system was far more market-oriented, deregulated, and free from direct government ownership or control than most assumed then or now. A process of negotiation and reason, mixed with pragmatism and recognition of valuing opportunity over principles, drove Swedish modernization. Eventually, the entire society became commoditized through gender equalization efforts, resulting in greater individualism and an increased breakdown of informal communal or collective functions. Gradually, the nature of individual initiative and incentive within capitalism undermined Folkhemmets goals and aspirations. Modernization dismembered traditional Swedish households and values as the economy experienced increasingly higher taxes and long-term industrial decline. Post-industrial jobs financed by government taxes eventually choked the supply of foreign direct investment, as well as domestic capital investment levels. When the private sector ceased to produce enough jobs to fund the highly taxed system, Folkhemmet experienced a crisis. The creation of public sector jobs intended mainly to push more women into the workforce resulted in numerous inefficiencies and financial problems. High taxation accelerated the decomposition of traditional civic relations. Moral hazards taxed honesty and eroded the common trust that had enabled the formation of this unique method of economic policymaking. What Childs initially communicated was a process of policy development dictated by gradualism and moderation, not a political system that could be transplanted across the globe. Thus, his “middle way of politics” should have been phrased the “moderate way of policy making.”

In the 1960s, a growing number of opinions from scholars, experts in international affairs and policymakers in the United States advocated for a policy adjustment toward Communist China. The military and political conundrum resulted from the Vietnam War and the still ongoing confrontation with the Soviet Union prompted Washington to develop a conciliating relationship with Beijing. China was cool to U.S. overtures to rapprochement, with anti-U.S. imperialism remaining a main foreign policy orientation, but adjusted its policy at the end of the decade. Many factors contributed to Beijing’s final positive response to U.S. overtures, both from the U.S. side and the Chinese side. This study illustrates how the political infighting in the central leadership of the Chinese Communist Party influenced Chairman Mao Zedong’s view of the relationship among Washington, Moscow and Beijing, and accordingly shifted China’s foreign policy from allying with the Soviet Union to rapprochement with the United States.

Why do political action committees (PACs) donate money to some candidates and not others? Answers to this PAC-strategy question take two different forms. First, scholars emphasize demand-side variables of the legislative market (e.g., geographic location of PAC donors), culminating in the organizational presence model of PAC strategy, which discounts legislative strategies and finds that PACs donate to ideologically friendly, electorally vulnerable candidates who campaign where PACs have an organizational presence. Second, public choice scholars emphasize supply-side variables of the legislative market (e.g., congressional member attributes), culminating in the legislative asset model of PAC strategy, finding that PACs donate to the lowest cost congressional members in the best position to provide legislation, or a legislative strategy. Using data from the Center for Responsive Politics, I test each model using every PAC donation to a congressional candidate from 1990–2006, organized by the geographic location of PAC donor-bases and the PAC’s policy sector. I find both models deficient in explaining PAC strategy. Only a small portion of PACs make decisions bounded by the geography of individual donors, making most PACs the nationalizing force many feared in the early 1980s. While PACs exhibit a clear strategy that seeks legislative benefit, the statistical significance of the legislative asset model comes from its ability to explain small donations with more accuracy than large PAC donations. In an attempt to reconcile these two approaches, I re-specify the legislative asset model with a conditional hypothesis: PACs donate money according to legislator characteristics and legislative strategies, but predominantly within the geography of its donor-base. This conditional hypothesis forms the foundation of a new mediated model, as the legislative strategy of PACs is mediated by the geographical distribution of its donor-base. This conditional hypothesis improves the explanatory power of PAC-strategy models marginally； however, the representational flaw in the PAC system still remains: PAC money creates financial constituencies that deviate from the geographic constituencies, exacerbating the differences between organized and unorganized interests in American political life.

In the comparative political economy literature, recent work has focused on the exogenous determinants of the initial political institutions that nations or colonies adopted in order to test the effects of institutions on differences across countries in income today. In this literature, the US is usually used as one case, and one in which its initial federal-level political institutions have been offered as a reason for the US’ relatively high incomes. Yet, using the US states as a comparative dataset allows for the examination of the effect of institutions on economic development more systematically while minimizing the effects of unobserved heterogeneity (e.g. cultural differences, colonial heritage, religion). I develop a simple model in which two time-invariant exogenous factors explain the initial basis of apportionment in the state legislature adopted by each state. Since these factors are exogenous, we have more confidence that the empirical effects captured are those of institutions and not an omitted variable. The initial basis of apportionment, as captured by my institutional variable and which I argue is a good measure of variation across states in political inequality, is strongly correlated with state-level policies commonly associated with economic growth.