Knowing Your Limits.

Informal Flexibility and Authority in the European Union

Mareike Kleine
London School of Economics and Political Science / Harvard University

Prepared for delivery at the 2011 Annual Meeting of the American Political Science
Association, September 1-4, 2011

Very rough draft. Comments welcome at m.o.kleine@lse.ac.uk.

Abstract: An intriguing problem in institutional analysis is how institutions create order when
the strategic environment in which they are embedded is volatile. The problem arises when the
conditions that require flexibility are not perfectly observable, because ambiguity about its actual,
situational demand opens the backdoor for defection. An important question in relation to the
abovementioned problem is therefore how governments assess whether formal rules apply or
flexibility is pertinent. The paper argues that previous studies failed to address this question due
to implausible assumptions about states ability to design optimal flexibility mechanisms. The
paper embeds the study of this question in an analysis of the EUs Council Presidency. The
central argument is that the Presidency serves a crucial information-providing role due to its
informal authority to adjudicate on demands to depart from the official procedures. Because some
governments face incentives to exaggerate the actual demand for flexibility for personal gains,
adjudicating authority is granted to a government that in normal times prefers to stick to the
official procedure. This arrangement induces other government to increase the level of
information in order to prevent the Presidency from rendering a false and unfavorable judgment.
The member states defer to this judgment because it permits them to uphold a deep, yet fragile,
level of cooperation that would otherwise prove impossible to sustain.

1
Electronic copy available at: http://ssrn.com/abstract=1912072

Introduction
An intriguing problem in institutional analysis is how institutions create order when the
strategic environment in which they are embedded is volatile.1 Consider the topical
example of monetary policy. Formal commitments to a low-inflation policy prevent
inflationary bias that emerges when markets anticipate governments temptation to
stimulate output beyond the natural level. In times of crisis, however, this commitment
may need to broken in order to stabilize the economy. Flexibility can also be necessary
for less heroic, political economic reasons. In international politics, formal rules that
impose some cost on defection commit opportunistic governments to pursuing a liberal
trade policy. Domestic demands for cooperation may change, however, and so it may
suddenly be necessary to accommodate a government facing unexpected domestic
pressure to break these rules, for unauthorized defection else prompts the unraveling of
cooperation. A dilemma arises when the conditions that require flexibility are not
perfectly observable, because ambiguity about its actual, situational demand opens the
backdoor for defection. An important question in relation to the abovementioned problem
is therefore how governments assess whether formal rules apply or flexibility is pertinent.
Variants of the literature on institutional flexibility, discussed below in more detail,
address this question primarily by way of analyzing the rationale behind formal flexibility
mechanisms. From this perspective, states are assumed to identify potential future
threat(s) to the commitment and then design flexibility mechanisms that authorize
temporary defection when the formal conditions for derogation are met.2 However, these
findings leave us with a puzzle: Flexibility mechanisms, designed in the face of
uncertainty, are necessarily incomplete and but broad guidelines that are too vague to be
operational. Their use in practice inadvertently entails a great deal of judgment a
judgment that has to be based on situational information about the actual demand for
flexibility, for else this mechanism falls prey to moral hazard. If this kind of situational
information is available, however, formal mechanisms become redundant, since
governments that are fully aware about the need to depart from the commitment would do
it also tacitly in order to protect the commitment. For commitments to be operational in a
dynamic strategic context, it is both necessary and sufficient to draw on situational
information about the actual domestic pressure for defection. The bulk of existing studies
therefore fail to address the crux of the aforementioned problem: How do states
constantly elicit the information that is necessary for them collectively to determine
whether to comply with or depart from the formal commitment?
The paper embeds the study of this question in an analysis of an informal institution in
the European Union (EU). The EUs legislative process commits the member states to
advancing economic integration, since it allows for imposing trade-enhancing decisions
on recalcitrant member states. The Council of Ministers, composed of government
representatives, is the main intergovernmental bargaining forum in this process. On
paper, its Presidency (an office rotating among governments on a six-monthly basis) is
merely responsible for the organization and smooth operation of the Councils work. In
reality, the Presidencys tasks go much further that. The government in office is endowed
1

For a brief summary see e.g. Shepsle 2006, 1042-1047.

The literature developed predominantly on the basis of WTO escape clauses. See e.g. Rosendorff 2005,
Rosendorff and Milner 2001, Sykes 1991.
2

2
Electronic copy available at: http://ssrn.com/abstract=1912072

with several informal prerogatives such as the micromanagement of the legislative

agenda, the proposal of compromises among the member states, and the decision whether
or not to conclude intergovernmental negotiations by calling a vote.3
The Presidency is a complex institution that performs a number of different tasks. But
one of its key functions represents a solution to the aforementioned problem that
confronts many other international organizations as well. The central argument is that the
Presidency serves a crucial information-providing role due to its informal authority to
adjudicate on demands to depart from the official procedures. Because some governments
face incentives to exaggerate the actual demand for flexibility for personal gains,
adjudicating authority is granted to a government that in normal times prefers to stick
to the official procedure. This arrangement induces other government to increase the
level of information in order to prevent the Presidency from rendering a false and
unfavorable judgment. The member states defer to this judgment because it permits them
to uphold a deep, yet fragile, level of cooperation that would otherwise prove impossible
to sustain.
Informal authority is difficult to trace empirically. So far, the literature on the
phenomenon of the Presidency has analyzed with mixed results whether its informal
prerogatives provide it with added influence on negotiation outcomes. However,
adjudicating authority need not translate into influence. On the contrary, the theory
expects the Presidency to propose outcomes that depart from the outcome it would have
preferred in normal times. This paper therefore employs a different analytical strategy,
one that focuses on the behavior that the theory predicts governments to display in
interaction. The testable implications are derived from the expectation that member states
provide the context for the government in charge to perform its adjudicatory function.
Specifically, they seek to keep issues from the agenda when, in normal times, the
government in office stands to gain from a procedural departure, for this would induce
the Presidency to misrepresent the actual demand for flexibility.
The paper is structured as follows. After a brief overview of the literature on institutional
flexibility, the paper lays out a theory of informal authority. A section follows that
specifies the theorys testable implications and alternative explanations for the formal
institutional context of the EU. The remainder then uses a mix of qualitative and
quantitative tools to put the theory to a test. The paper concludes by discussing how the
findings can be generalized beyond the case of European integration.

The literature
The literature on institutional flexibility first emerged in the field of monetary policy
under labels such as rules versus discretion or rigidity versus stability. Because
wages are sticky, governments are tempted to use a monetary stimulus to decrease real
wages and thereby increase output and employment beyond the natural level. But since
wage setters anticipate politicians time-inconsistent preferences and adapt contracts
3

For a cursory description see e.g. Hayes-Renshaw and Wallace 2006, chap 5.

accordingly, the effect is washed out and results in inflation bias.4 In normal times, rules
that commit governments to low inflation are therefore superior to discretionary
monetary policy. In times of crisis, however, the rule might need to broken in order to
stabilize the economy.
The problem is arguably more complex in international politics due to the multitude of
factors that may generate a demand for flexibility. The analogous time-inconsistency
problem in international politics stems from the fact that opportunistic governments may
suddenly face incentives to renege on cooperation.5 States therefore tie their hands in
formal international institutions in order to bolster the credibility of commitments to a
cooperative policy. Because international institutions need to be self-enforcing to be
effective, institutional stability crucially depends on their capacity to reinforce states
interest in adhering to them. Preferences may change, however, and so the plethora of
factors that determine states interests in cooperation are also a potential source of
instability.
One strand of the literature focuses on factors at the systemic level. Bagwell and Staiger
argue that exceptionally high trade volumes induce governments to defect unilaterally
from a commitment in order to maintain the terms of trade.6 Stone argues that dominant
states may suddenly be tempted to exercise viable outside options to institutionalized
cooperation.7 Another stream focuses directly on the vicissitudes of domestic politics that
determine governments policies. A group of legal scholars, economists and political
scientists argue that unanticipated changes in economic8 and/or domestic political
conditions9 suddenly create rewards for opportunistic governments to defect from an
agreement. All these sudden defections, regardless what caused them, jeopardize the
commitment both in the short run and the long run, because they trigger punishment
strategy that escalate in trade wars10 and/or gradually diminish the value of a highly
beneficial commitment.11
The literature has also proposed a number of institutional solutions for this problem. For
example, Rogoff suggests appointing a conservative central banker who places more
weight on low inflation than the society at large, but also enough weight on stabilizing
employment to ensure that she react to economic shocks.12 Similarly, Downs and Rocke
propose to establish sanctions for noncompliance that are low enough to allow
politicians to break the agreement when interest group benefits are great, but high enough
to encourage states to obey the agreement most of the time and thereby prevent trade
war.13 Also Rosendorff and Milner expect states to combine the make the use of escape
clauses dependent on an optimal penalty, one that balances the need for as much
4

Kydland and Prescott 1977.

Grossman and Helpman 1994.
6
Bagwell and Staiger 1990, 780.
7
Stone 2011.
8
Sykes 1991, 279.
9
Downs and Rocke 1995, 77, Rosendorff and Milner 2001, 832.
10
Downs and Rocke 1995, 91.
11
Kleine 2009.
12
Rogoff 1985, 1187. Modified models consist of conservative bankers in combination with a political
counterweight or an escape clause. For s brief summary, see Lohmann 2006, 532-535.
13
Downs and Rocke 1995, 77.
5

cooperation as possible, while allowing for some flexibility in times of domestic political
pressure.14
Yet the literature has some shortcomings. In terms of prescription, many of the
aforementioned models are based on implausible assumptions of states information
about future demands for flexibility.15 If already the commitment is made in the face of
uncertainty about the future, how can states know in advance the optimal measure of
sanctions that is low enough to encourage a breach of the commitment and high
enough to prevent it? Flexibility mechanisms are necessarily incomplete and but broad
guidelines that require a great deal of political judgment to be operational in practice.
This judgment in turn must be based on situational information, since ambiguity about
the actual demand for flexibility will otherwise result in an abuse of the mechanism.16
The availability of situational information, however, renders the formal mechanism
redundant, since states that are fully aware of the need to accommodate another
government under pressure would do that also tacitly in order to sustain cooperation.
Most studies therefore remain overly static and fail to address the crux of the question,
namely how states elicit situational information about the actual demand for flexibility.
In light of this logical inconsistency, it is not surprising that there are gaps between the
models prescriptions and the behavior that governments display in practice. For
example, many of the abovementioned models, most of which are based on an analysis of
the GATT Article XIX escape clause, seek to explain retrospectively the rationale behind
the design of flexibility mechanisms. But Pelc finds that, contrary to what some of these
models predict, that member states rarely ever use optimal sanctions in response to
states appeals for exceptions.17 In addition, Stone (for the case of the IMF)18 and Kleine
(for the case of the EU)19 show that states adopt practices of informal governance in order
to add flexibility to formal commitments.
In sum, a burgeoning literature on institutional flexibility has suggested a number of ways
for governments to commit to policies and still retain a measure of discretion to react
flexibly to unforeseen events that render the commitment inadequate. However, the
literatures focus on formal flexibility mechanisms brings about a number of
shortcomings. Importantly, formal flexibility mechanisms do not solve the problem at
hand. Since they are designed in the face of uncertainty about the future, they are likely to
be too vague to be operational in practice. Unsurprisingly, empirical studies find that
flexibility is often provided tacitly rather than formally. The crucial question in relation to
the dilemma between stability and flexibility is therefore not the ex-ante formal design of
flexibility mechanisms. The crux of the problem is how to elicit situational information
about that allows states to assess on an everyday basis whether formal commitments
apply or flexibility is pertinent. The following section suggests how this is done in the
European Union.

14

Rosendorff and Milner 2001, 835.

See also the critique in Wendt 2001, 1029-1032.
16
For a similar critique in monetary policy see e.g. Svensson 2002, 57.
17
Pelc 2009, 350.
18
Stone 2011.
19
Kleine 2009.
15

A theory of informal authority in the EU

The core argument of this paper is that the Presidency of the Council of the EU serves a
crucial information-providing role in that its informal authority to adjudicate on demands
to depart from the formal procedures induces all governments to increase the level of
situational information that is necessary to assess whether formal rules apply or flexibility
is pertinent. This theory of informal authority is based on two assumptions about
preferences and information in the EU. First, state preferences are mutable and may
change in unpredictable ways.20 While inaccurate in some issue-areas, this assumption is
plausible in the realm of economic integration, the very core of the European integration
process, where patterns of societal interdependence are subject to all kinds of unforeseen
economic (e.g. technology, demand and supply) and societal (e.g. elections, group clout)
shocks that alter domestic demands for cooperation and governments incentives to heed
to them. The second assumption is that governments are better informed about their
preferences than their cooperating partners. Although the political systems of the
European member states are transparent, the various aforementioned factors that
determine a governments policy choice nonetheless render the process of preference
complex and difficult to comprehend from outside.
The theory is introduced in four steps. Firstly, it is explained why governments enter
formal commitments to cooperation, and what form they take in the European Union. The
second step argues that unforeseen shifts in patterns of societal interdependence can
suddenly render these formal commitments inadequate. In a third step, it is explained
why this inadequacy creates a demand for informal authority, while the final, fourth step
discusses how this informal authority can be provided.
The demand for commitments
Institutions are critical for actors to capture gains from cooperation when preferences
may change in unforeseen ways. Cooperation is untenable if one suspects another actor
will renege on the promise to reciprocate.21 In order to reap joint gains under this
condition of time-inconsistent preferences, governments therefore design rules that
bolster the credibility of commitments to cooperation. By specifying conduct in
contingent situations and delegating authority to make and enforce common policies to
international organizations, rules constrain governments choices ex ante in favor of
cooperation. The cooperating partners are consequently able to form stable expectations
about each others future behavior.
The demand for formal commitments under conditions of time-inconsistent preferences
explains large parts of the EUs institutional set up.22 The objective of deep economic
integration that does away with any obstacle to the free circulation of goods, persons,
services and capital implied a stream of individual decisions on the abolishment or
20

The economic literature therefore distinguishes between unpredictable uncertainty and measurable risk.
On the application of this terminology in International Relations see e.g. Wendt 2001, 1029.
21
The seminal article is Kydland and Prescott 1977.
22
Majone 1994, 90, Moravcsik 1998, 3-4, Pollack 1997, 104.

harmonization of diverse domestic regulations. In order to ensure that these decisions

would constantly deepen the level of economic integration, the member states delegated
agenda-setting and implementation powers to a supranational bureaucracy, the European
Commission. Most decisions are furthermore adopted today jointly with the European
Parliament23 by a qualified majority vote. The resulting legislative procedure
constitutes a credible commitment in that it provides opportunities to impose individual
decisions on one or more recalcitrant governments.
The demand for flexibility
Absent external enforcement, institutions have to be self-enforcing, that is, the rules
effect has to be as such as to constantly reinforce states interests in adhering to the
institution. Yet, exactly because the rules are set up in uncertainty about the future,24
situations are bound to arise where sticking to the letter of the law fails to reinforce
states interests in adhering to the institution. When societal patterns of interdependence
are subject to change, the distribution of the gains and losses of cooperation at the
domestic level may also change in unexpected ways. Situations may therefore arise
where an indiscriminate use of formal rules suddenly imposes concentrated costs on an
individual group, which subsequently mobilizes and pressure its government into
defection, even if cooperation is in fact beneficial for the society as a whole.25
Todays Single Market is a good example in that regard. It is supposed to become an area
in which the free circulation of the factors of production are as easy among the member
states as it is within each one of them. However, the removal of trade impediments at the
systemic level always also leads to redistribution at the domestic level. Furthermore, the
amount of domestic redistribution increases with the depth of the initial level of
integration. This in turn increases the number of people that are affected by the institution
and seek to pressure their government into adopting a policy that most closely matches
their interest. It is therefore not surprising that students of EU decision-making find no
evidence for clear cleavages or coalition patterns among the member states. Dynamic
preferences like this are evidence for shifting patterns of interdependence that are a
fruitful ground for unforeseen domestic distributive conflicts and sudden pressure for
defection.
Why does unauthorized defection generate a demand for flexibility? Apart from
generating deadweight loss for the defecting state and its most intertwined trading
partner, unauthorized rule violations inflict a cost on all states because they impair the
credibility of the commitment that the formal rules embody.26 The commitment itself
takes a value of itself as it enables the production of high joint gains. Defection
consequently diminishes the value of the institution. All governments are therefore better
off if they prevent this cost by adding situational flexibility to the formal rules a

23

To be sure, the empowerment of the European Parliament defies the credible commitment perspective.
Yet it also never undermined this function.
24
It is therefore useful to distinguish between measurable risk and uncertainty. Cf. Wendt 2001, 1029.
25
Downs and Rocke 1995, chap 4, Kleine 2010, 4, Rosendorff and Milner 2001, 832.
26
Kleine 2010.

flexibility that manipulates the domestic distributive effects of cooperation in a way as to

restore the potential violators interest in adhering to the institution.
The demand for informal authority
Let us briefly assume that the conditions that lead a government to renege on a
commitment were observable for all cooperating partners. In this case, as mentioned
before, the member states would accommodate this government tacitly in order to
maintain the value of the institution. However, if the actual demand for flexibility is not
perfectly obvious to everyone, the collective willingness to provide flexibility generates
moral hazard in that governments have an incentive to claim to be facing unmanageable
domestic pressure merely to receive rents or manipulate the terms of trade at their
partners expense. In order to resolve the dilemma between flexible and credible
commitments, governments therefore constantly need to elicit information about the
actual demand for flexibility that the current situation requires.
How do member states elicit situational information about the actual demand for
flexibility? If the conditions that justify flexibility were perfectly predictable and put in
written, the authority to adjudicate on claims could be delegated to a legal body that
merely assesses whether these official conditions are met. In fact, it has been argued that
it is principal function of the WTOs Dispute Settlement Procedure to collect information
that is necessary to allow for an efficient breach of commitments.27 However, institutions
are necessarily designed in the face of uncertainty about the future. The description of the
conditions that require flexibility cannot be but broad guidelines, and their use in practice
will therefore leave much room for judgment. A legal body cannot take a decision like
this, because there are no further legal norms on which it could draw for guidance. The
decision to depart from the rules and, thus, to cede a right for procedure is consequently a
political decision that needs to be taken by the member states on the basis of situational
information.
The supply of informal authority
How do governments adjudicate on claims for flexibility? This authority cannot lie with
the government that demands flexibility, since its incentive to exaggerate the actual
demand generates the problem of moral hazard to begin with. For the same reason, the
authority cannot lie with a government that, in normal times, would gain from a
procedural departure, since it has an incentive to collude with the government that
demands flexibility. The member states can trust the judgment of a government that, in
normal times, would stand to lose from a procedural departure, since the only reason for
it to recommend flexibility in a way as to avert the costs associated with an unauthorized
rule violation. Its counterparts are subsequently induced to increase the level of
situational information about the legitimacy of the claim in order to prevent this
government from rendering a false, unfavorable decision.

27

Rosendorff 2005, 391.

Tracing informal authority

Authority that is neither based on legal rules nor on enforcement capabilities is difficult
to trace empirically. Previous qualitative and quantitative studies of the Presidency have
sought to determine whether its prerogatives allow the government in charge to shift
decision outcomes in its favor.28 However, although informal authority implies that
governments restrain themselves and pay deference to the Presidencys decisions, it need
not translate into distributive gains. From our perspective, the Presidencys authority is
functional and derived from the fact that its decisions enable the member states to uphold
a beneficial level of cooperation that they would otherwise not be able to sustain.
This paper therefore employs a different analytical strategy. Instead of focusing on the
effect of the Presidency on decision outcomes, we focus on the behavior that the theory
predicts the governments to display in interaction. This section derives three aspects of
the Presidencys authority that can be observed in practices.
Testable implications
To recap, all governments have an incentive to avert unauthorized rule violations, for it
damages the value of the commitment that the formal rules embody. But when the
conditions that justify flexibility are not perfectly observable, governments also face an
incentive to exaggerate the demand for flexibility in order to reap rents at their
cooperating partners demands. Governments therefore need to decide on the spot and on
the basis of situational information whether it is necessary to depart from the procedures.
Legal norms are likely to be too vague to allow legal bodies to take a decision like this.
The decision has to be taken by a government that, in normal times, stands to lose from
such a departure. While a government that else gains from a procedural departure has an
incentive to misrepresent the demand for flexibility, the judgment of a government that
loses can be trusted, since the only reason why this government would recommend
flexibility is to avert a situation that sparks domestic conflicts, lead to unauthorized rule
violation, and damage the value of the commitment. Other governments defer to the
decision, because it enables them to uphold a highly beneficial level of integration.
How would this arrangement look like within the EUs formal institutional context? In
principle, the member states could delegate adjudicatory authority for each issue under
negotiation to a suitable government. But this solution seems prohibitively cumbersome
in light of the hundreds of legal acts that the EU adopts each year. Given that the treaty
already provides for the Council Presidency to play a special role in the legislative
process, another solution lies in adapting this office with a view to creating the context
that is necessary for the Presidency to perform its function. Specifically, the member
states keep issues off the legislative agenda where the government holding the office
would, in normal times, gains from a procedural departure.

28

Individual case studies include Beach and Mazzucelli 2007, Elgstrm 2003b, Tallberg 2006. Thomson
(2008, 611-612) finds in a statistical analysis that the Presidency enjoys added bargaining power while
Warntjen (2007) finds evidence for a Presidency bias on the agenda.

Three testable implications follow:

Hypothesis 1: The Presidencys informal prerogatives co-evolve with a
permanent informal practice to manipulate of the legislative agenda.
Hypothesis 2: It takes longer on average to conclude negotiations,
everything else being constant, if one or more governments that preside
the negotiations have an incentive to abuse their prerogatives.
Hypothesis 3: Governments pay deference to the Presidencys judgment
if the government in charge has no incentive to abuse its prerogatives
for personal gains. They deny deference when this condition is not met.
Alternative explanations for informal authority
The curious development of the Presidencys informal prerogatives and the behavior that
governments display in interaction may have alternative explanations that we need to
control for. Classical regime theory regards institutions as a way to reduce the relative
costs of transactions. Jonas Tallberg recently interpreted the emergence of the Council
Presidency along these lines. In this theory, intergovernmental negotiations are subject to
various problems such as overcrowded agendas or incomplete information that bring
about a demand for leadership.29 The argument goes that states enhance the efficiency of
negotiations by delegating the task of agenda management and brokerage to the
Presidency.30 The Presidencys privileged position, in turn, provides each government in
office the opportunity to shift decision outcomes in their favor. 31 Put differently, the
Presidencys authority is based on the function of its office. Yet instead of eliciting
information about the demand for flexibility, classical regime theorists argue that the
office of the Presidency function enables governments to overcome interstate negotiation
problems. While classical regime theory can in principle account for the co-evolution of
informal prerogatives in agenda setting and negotiations, it nonetheless yields two
testable implications that contradict our theory of informal authority.
Alternative Explanation (classical regime theory) ad 2: Since the
Presidency wields authority by virtue of its office, there is no
correlation between the duration of negotiations and the Presidencys
stance on the issue under discussion.
Alternative Explanation (classical regime theory) ad 3: Governments
pay deference to the Presidencys judgment regardless of its stance on
the issue under negotiation.
Another potential explanation of the Presidencys informal authority is the power of the
government in office. Stone argues that informal practices are often a means for dominant
states (i.e. states that potentially have viable outside options) temporarily to eschew

29

Tallberg 2006, 3.
Tallberg 2006, 24-27.
31
Tallberg 2006, 31-33.
30

10

institutional constraints when their vital interests are at stake.32 Accordingly, the
Presidencys informal prerogatives are not permanent and emerge only when a powerful
country takes over the helm. The authority to decide that legal commitments be
suspended lies with the dominant state, which under incomplete information and
repetition is expected gradually to build a reputation for restraint.33 But it is not expected
to make its use of informal practices dependent on the judgment of another government.
Two testable implications follow.
Alternative explanation (power-based institutionalism) ad 1: The
Presidencys informal prerogatives in agenda setting and negotiations
are not permanent practices.
Alternative explanation (power-based institutionalism) ad 2: Since the
Presidencys authority is endogenous to power, there is no correlation
between the duration of negotiations and the preferences and power of
the government in office.
Alternative explanation (power-based institutionalism) ad 3: Dominant
states do not pay deference to the decisions of small governments while
small governments pay deference to the decision of dominant states in
office.

The means to wield informal authority

For the Presidency to fulfill its adjudicatory function, governments have to make sure that
the agenda does not include issues for which the government in charge has an incentive
to misrepresent the actual demand for flexibility. The member states therefore need to
keep issues off the agenda on which this government would, in normal times, gain from a
procedural departure. We consequently expect the Presidencys informal prerogatives to
co-evolve with informal practices to manipulate the legislative agenda. This prediction is
at odds with power-based institutionalism, which expects only dominant countries to
adopt informal practices. Drawing on archival material and contemporary observations,
this section evaluates this first testable implication in a descriptive inference of the
development of informal practices in agenda setting and intergovernmental negotiations.
Informal prerogatives in intergovernmental negotiations
The Treaty of Rome, the founding treaty of the European Economic Community,
mentions the Council Presidency only briefly by stipulating that the Council met upon its
initiative. To the surprise of all governments, this seemingly innocuous office soon came
to play a central role in intergovernmental negotiations. In 1961, three years after the
inception of the Community, an insider of the legislative process observes:
32

Stone (2011) argues that small states accept these practices of informal governance in exchange for more
favorable formal votes.
33
Stone 2011, 45.

11

There has been a very interesting development in the first three years of
practical application of the Treaty. More frequently the Presidency finds
itself released from its task of expressing its national position as a
member of the Council of Ministers. Instead, it devotes itself to the
organization of work and the search for a compromise among
governments.34
Its new role in decision-making was based on several informal practices, which
developed as early as the early 1960s and have remained remarkably stable since. The
first informal practice was the establishment of intense contacts with recalcitrant
governments. The Presidency consequently became the hub of Council negotiations
very shortly after the treaty had become effective. The purpose of these contacts was,
according to the German delegations description of its 1964 Presidency, to attain
information about motives and problems of individual delegations.35 Also the
Commissions executive secretary, Emile Nol, underscores the importance of this
informal practice:
The chairman has a feeling for unformulated desiderata and requests.
He knows where positions are reserved. He knows how to take account
of and interpret remarks made in confidence.36
The practice proved remarkably stable over time. It was accentuated further with the
gradual promotion of the European Parliament to the status of a co-legislator. Instead of
negotiating face-to-face between MEPs and the Council in full session, governments
usually rely on the Presidency to establish contacts with the Parliament and conduct
negotiations on the Councils behalf.37
The Presidencys hub position in Council negotiations was accompanied by a second
practice, the preparation of compromise proposals, which soon became known as
presidency compromises. The term appears in Council documents as early as the early
1960s.38 Nol explains:
[The Commission] is more obliged to uphold, even practically on its
own, the Simon-pure position, which the Commission has decided is
most in accordance with the Community interest... So it is the chair that
has the most scope for quietly taking soundings, putting out feelers, and
coming forward at the right moment with compromise suggestions
particularly suggestions some distance away from the Commissions
original proposal.39

34

Mgret 1961, 636, 646.

Vertretung der BRD bei der EWG und EAG 1965. It was thereby assisted by the Council Secretariat,
which gathered intelligence from the members of Permanent representations or in direct consultation in the
capitals of other governments.
36
Nol 1967a, 238 taking account of Nol 1966, 32, Nol 1967a.
37
Council of the European Union 2000a, 15, Hayes-Renshaw and Wallace 2006, 151, 212.
38
Vertretung der BRD bei der EWG und EAG 1964. Cf. van Rijn 1973, 652, Sasse 1975, 143-147. Cf.
Dewost 1987, 174.
39
Nol 1967b, 42, Nol and tienne 1971, 437-438 and Nol 1967a, 239.
35

12

A third informal practice is the Presidencys prerogative to decide whether and when to
conclude negotiations by calling a majority vote.40 It emerged in the late 1960s and
became more prominent in the mid-1970s with an increased use of majority voting in
Council negotiations. In line with our theory of informal authority, contemporary reports
directly pinpoint its adjudicatory function. A report on the functioning of the European
institutions describes and approves of the unwritten law that the Presidency decides
whether and when to call a vote:
Each state must remain the judge of where its important interests lie.
Otherwise it could be overruled on an issue which it sincerely
considered a major one... The application of these solutions lies in the
hands of the Presidency. The Chairman of the Council is best placed to
judge whether and when a vote should be called.41
The Councils Jurisconsult, Jean-Louis Dewost, concurs:
[Overruling] a minority is just as reprehensible as insisting on
concessions up to the point that it threatens the community interest
Since the normal negotiation process has not allowed [such conflicts] to
be prevented, the only alternative to the use of force is arbitration
These rules of the game have led to the development of a decisive role of
a new communitarian organ: the Presidency. It is the Presidencys
responsibility to maintain normal political relations within the
Community, to try to construct compromises between extreme positions,
and at the same time to avert conflict.42
The informal manipulation of the legislative agenda
The theory of informal authority argues that the Presidency wields authority on the
condition that it has no incentive to exaggerate the need to depart from the procedures.
Do the member states consequently drop these issues from the agenda? At the same time
that the Presidency developed these aforementioned informal practices, the governments
also began to manipulate the Councils legislative agenda. The Treaty of Rome had
endowed the Commission with the exclusive right of legislative initiative. This monopoly
implied that the Commission determined both the substance and the timing of draft
proposals for legal acts. The Council of Ministers, later jointly with the European
Parliament, would then adopt these proposals by qualified majority or change them
unanimously. However, shortly after the treaty entered into force, the governments began
to pass official Commission proposals to informal committees of government
representatives for a preliminary evaluation. They lingered in this informal Council
substructure often for an indeterminate period of time.43 The Council agenda
consequently ceased to be determined by the Commission, which afforded governments
the opportunity to structure the Council agenda according to new priorities.
40

Nol and tienne 1969, 47. Cf. Torrelli 1969, 91.

Council of the European Communities 1980.
42
Dewost 1983, 78-79.
43
Sasse 1972, 88.
41

13

As soon as the agenda opened up to new priorities, the Presidency began to manage its
specific composition. The member states permanent representatives recommended
already in 1960 that the () choice of important subjects, which merit discussion in the
Council, ought to be conferred to the Presidency44 This new task provided the
Presidency the opportunity to structure the agenda according to its interests. It was able to
prioritize issues it preferred and, ceteris paribus, let others slide.
According to close observers, the Council Presidency usually neglects the Commission
proposals for legal acts that it would like to see altered. Proposals, which the Presidency
prefers as they are, consequently move up. The reason is, in accordance with our theory,
that while it is expected to respect other delegations reservations against the Commission
proposal, the Presidencys own demands to alter it usually go unheeded.45 Violations of
this norm were considered surprising, inappropriate, and immediately inhibited.
Attempts like this, an internal report on the conduct of the Presidency emphasizes,
would meet with strong refusal.46 In light of this, the Presidency stalls these dossiers
where possible until the next government takes over.47
The Presidencys micromanagement of the agenda became a generally accepted fact.48 In
recognition of this development, the Council obligated incoming presidencies from 1973
onwards to publish their work program and timetables for meetings.49 This work program
became the basis for the state of the Community address, in which each incoming
Council Presidency announced a list of its objectives and priorities to the EP.50 But
despite this phenomenal rise in importance, the Presidencys agenda setting function was
barely formalized. In 1988, it was merely decided that each Presidency should present a
more comprehensive work program for its six-month period. In 1993, this procedure was
integrated into the Councils internal Rules of Procedure.51
The Presidency managed to retain its influence on the agenda despite the emergence of
rival agenda setter like the European Council. For that purpose, governments establish
contacts with the Commission well before their term in order to ensure a timely
preparation of preferred issues.52 The Presidency also draws on more subtle strategies. In
1986, a confidential FCO document entitled Guidance on the Exercise of the
Presidency instructed British officials on the respective tactics.53 Asked about it, a
British official defended the document:

44

Conseil de la CEE et de la CEEA 1960.

Vertretung der BRD bei der EWG und EAG 1965. Today, the informal Presidency Handbook (Council
of the European Union 2001) states right at the beginning: The Presidency must, by definition, be neutral
and impartial. It is the moderator for discussions and cannot therefore favor its own preferences or those of
a particular member state.
46
Vertretung der BRD bei der EG 1971. Cf. Elgstrm 2003a, 47.
47
Wallace and Edwards 1976, 544. Cf. Elgstrm 2003a, 50, Wallace 1985b, 16-17.
48
Council of the European Communities 1980. Dewost 1984, 32. Cf. Wallace 1985b, 5.
49
Amphoux, et al. 1979, 110, de Bassompierre 1988, 24.
50
Wallace and Edwards 1976, 543, Westlake 1995, 342.
51
Tallberg 2006, 50.
52
Edwards and Wallace 1978, 82, Wallace 1985a, 463.
53
Cited in Maass 1987, 10.
45

14

Everyone in the community uses the kind of maneuvers or procedures

that were mentioned in the paper (). The only surprising thing is
that the British put them on paper.54
The informal manipulation of the agenda has hardly changed since. Asked about the
importance of an adequate balance of interests on the agenda, a former Permanent
Representative explained succinctly:
Nobody cares if the Council agenda adequately balances the
governments various interests. Its as simple as that: Governments
decide what needs to be decided and what the Presidency thinks is
important.55
In sum, at the same time as the Council Presidency gained informal prerogatives that
allowed it to adjudicate on claims for flexibility, it also gained control of the Councils
legislative agenda. Contemporary sources suggest that the government in office used this
influence to drop legislative dossiers from the agenda that it preferred to alter. The reason
is that its cooperating partner would strongly refuse any demand or attempt to change the
proposal for as long as this government was in charge of the Presidency.

Creating the context for informal authority

The previous chapter showed that the Presidency is able to manipulate the Councils
legislative agenda despite the Commissions formal monopoly of initiative of the agenda.
Qualitative data suggest that the Presidency uses this prerogatives in order to drop issues
from the agenda if, in normal times, it stands to gain from a procedural departure, for else
it forfeits its authority in intergovernmental negotiations. This section subjects the
hypothesis to a further, very simple test. The following linear regression analysis
evaluates whether it takes longer, everything else being equal, to adopt a legal act when
one of the presiding governments faces such a conflict of interest.
The prediction is at odds with other theories of the Presidencys informal authority.
Arguing that Presidencys wields authority by virtue of their office, classical regime
theorists would not expect the Presidency to drop issues that it wishes to alter. Nor would
power-based institutionalism, which expects authority to be endogenous to power, expect
any correlation between the duration of negotiations and power or preferences.
The hypothesis is tested using an original data set of legislative dossiers adopted between
2000 and 2001. This time period was chosen for the practical reason that the Councils
electronic register only covers dossiers including agendas and minutes from 2000 on. The
data set was randomly narrowed down to Council directives adopted in the second term
between the months of July and December of each year. The search in the Eur-Lex

54
55

Maass 1987.
Interview # 3.

15

database search yields 43 observations. Some Commission proposals go back to 1989 so

that the data set includes all possible 15 Council Presidencies.
The central dependent variable is the duration of negotiations (DURATION) measured as
the number of months from official submission of the Commission proposal until its
official adoption. The central independent variable (PRES) is a dichotomous variable
measuring whether or not a country that at one point during the entire lifespan of a
legislative dossier holds the office of the Presidency demands to change the Commission
proposal under negotiation. Demands like this are registered in the Council minutes. The
variable takes on a value of 1 if the available documents show evidence for such a
demand, and 0 otherwise. Another dichotomous control variable was created for the
existence of conflict per se (CONFLICT). Conflict was measured in a similar way as the
independent variable, namely by registering the existence or non-existence of opposing
demands in the Council to change the Commission proposal. The variable has a value of
1 if such a conflict can be detected in the minutes, and 0 otherwise.56
The duration of negotiations may also be influenced by the formal voting rule, because a
recalcitrant government can invariably block a decision under unanimity. If majority
voting applies, however, governments can impose and outcome on a minority in the
Council. We therefore added a control for the underlying voting rule (MAJORITY). This
variable has a value of 1 if the legal base of the dossier provides for qualified majority
voting, and 0 otherwise. Another factor that may increase the duration of negotiations is
parliamentary participation in decision-making. A dummy variable was created in order
to account for parliamentary participation. EPINVOLVE is a dichotomous variable
measuring whether or not the legal basis provides for Parliaments participation in
decision-making. It takes a value of 1 if it participates, and 0 otherwise. Assuming that
Parliamentary involvement needs not increase the duration of decision-making per se,
another dichotomous variable was created that measured the scope of involvement
(EPSTRONG). If the legal basis provides for the weak consultation procedure, the variable
takes a value of 0. If the strong codecision procedure applies, the variable has a value of
1.57
This simple regression discerns a relationship between the duration of negotiations and a
conflicted Presidency. The models do a good job, explaining more than 60 per cent of the
variation, despite the small number of observations. In both models, the PRES variable is
correctly signed and significant at the 1 per cent level. The results also show that strong
Parliamentary involvement on average increases the duration of negotiations. This is not
surprising given that parliamentary involvement requires governments to conduct
additional negotiations.58 Also of little surprise is the finding that majority voting
56

These categorical variables are admittedly crude. Yet they are arguably more precise than existing
variables that measure the interval between actors ideal points, which lose their comparability when they
are normalized on a scale of 0 to 100. Put differently, on a normalized scale, a distance of 80 between
different ideal points can signify both a minor disagreement and a major conflict. These datasets are
therefore not useful for our purposes.
57
The basic equation for the first model estimating the relationship between a conflicted Presidency and the
duration of negotiations with parliamentary involvement is: DURATION = 0 + 1 PRES + 2 CONFLICT + 3
MAJORITY + 4 EPINVOLVE +. The equation for the second model including a variable for the strength of
parliamentary involvement is: DURATION = 0 + 1 PRES + 2 CONFLICT + 3 MAJORITY + 4 EPSTRONG +.
58
See, for instance, the discussion in McElroy 2006, Schulz and Knig 2000.

16

decreases the duration in cases of strong parliamentary involvement. The existence of

conflict slightly increases the duration of negotiations. But the effect is not statistically
significant.
Table about here
In a nutshell, the data provide strong evidence for the validity of the hypothesis that the
duration of negotiations on a dossier increases significantly when one of the governments
at the helm faces a conflict of interest, that is, when it itself wishes that changes be made
to the dossier under question. This can be interpreted as evidence that governments stall
these dossiers at least for as long as the conflicted government chairs over the
negotiations. However, the statistical analysis detects correlation, but it cannot unveil the
exact causal mechanisms. This will be done in the following case study, which
demonstrates that the Presidencys authority depends on its ability to render a judgment
that other governments can trust.

The limits of informal authority

The previous sections showed that the Presidency not only has the means to manipulate
the legislative agenda despite the Commissions formal monopoly of initiative. The
statistical analysis revealed that it also takes longer to find an agreement on dossiers
when the government in office would, in normal times, gain from a procedural departure
and consequently have an incentive to misrepresent the demand for flexibility. This
section now eyeballs governments reaction in the event that the Presidency suddenly
faces such a conflict of interest.
The negotiation of the so-called End-of-Life-Vehicles (ELV) directive constitutes a kind
of natural experiment, because Germany during its Presidency suddenly changed its
position from strong support to a strong opposition of the Commission proposal under
negotiation. The theory of informal authority would expect Germany either immediately
to drop this issue from the agenda or its cooperating partner to deprive it of its informal
prerogatives. Classical regime theory, which holds that the Presidency wields authority
by virtue of its office, would not expect that the German Presidency lose its authority in
response to its sudden preference change. Power-based institutionalism expects the
Presidencys authority to be endogenous to the interests of powerful states. Given that
Germany is the largest economy in the Single Market, this theory would still expect other
delegations to defer to Germanys decision and, conversely, the German delegation to
ignore the decisions of smaller governments in office.
The European Commission officially submitted its proposal for the ELV directive in July
1997. The draft directive stipulated take back and recycling duties for the automobile
industry. Initially, only Spain and the UK voiced opposition while the majority of
governments, including Germany, Sweden, Denmark, and Austria, supported the
Commission proposal.59 In line with our theory, negotiations in the Council substructure
and with the EP did not make much progress under the conflicted UK Presidency in the
59

Agence Europe 1999c.

17

first half of 1998. The Austrian Presidency consequently inherited responsibility to find
an agreement among the member states and announced its determination to adopt a
common standpoint by December 1998.60 Under its chairmanship, the Council
substructure quickly prepared a compromise text that all delegations were willing to
accept.61 The Council declared that it expected the adoption of the Councils common
position in March during the German Presidency.62 The German Minister for the
environment, Jrgen Trittin of the Green Party (Bndnis 90/Die Grnen), announced that
the adoption of this directive would be a key policy goal for Germanys term in charge of
EU business.63 Shortly before the meeting in March, the German delegation announced
that it felt confident of concluding the negotiations.64
Surprisingly, the social democratic German Chancellor Schrder (SPD) suddenly decided
to revoke the German delegations support for the compromise. The reason was a direct
intervention by the chairman of Volkswagen, Ferdinand Pich, who had complained
about the extensive adjustment costs the automobile industry was going to face. Schrder
invoked his prerogative as Chancellor to define the policy guidelines and instructed his
coalition partner Trittin to postpone the scheduled decision in order to reopen
negotiations.65 Trittins colleagues in the Council of Ministers heavily criticized this
decision during a lively informal discussion at lunch.66 Trittin subsequently announced
contrary to Schrder that the German delegation would no longer seek to make changes
to the text or postpone a decision.67
The UK and Spain, who also opposed the directive, were subsequently rumored to have
contacted the German chancellery in order to fathom the possibility of forming a
blocking minority against the Commission proposal. In the event that a vote was called,
this blocking minority would reject the directive once and for all. Other delegations
reacted strongly to this rumor and regarded this imminent maneuver as an abuse of the
Presidencys power and reminded the German delegation of the conditionality of its
authority. If the German Presidency indeed decided to call a vote that would block the
proposal, they threatened they would for the first time in the history of European
integration overturn the Presidencys decision, which after all merely rested upon an
informal agreement.68
In light of this tense situation, the German delegation decided to avoid further discussions
by listing the ELV directive as the 10th item of an already loaded agenda.69 Furious
demands on the part of the Commission, Finland, Sweden, Denmark and Austria to
discuss the Presidencys conduct on this matter were rowdily brushed off. Trittin then
decided to discuss the dossier in a strongly restricted session.70 In this session, he
60

European Voice 1998.

Council of the European Union 1998.
62
Agence Europe 1998a, Agence Europe 1998b.
63
European Voice 1999b.
64
Agence Europe 1999d.
65
On the conflict within the German delegation see Wurzel 2000.
66
Agence Europe 1999a.
67
Frankfurter Allgemeine Zeitung 1999b.
68
Agence Europe 1999c.
69
taz 1999.
70
Die Welt 1999c, Frankfurter Allgemeine Zeitung 1999a.
61

18

demanded concessions for the German car industry and announced his intention to call a
vote against the directive. Because one television camera was still recording sound, the
European Voice was able to report the highlights of exchanges between the Ministers:
Fascinated journalists gathered round the screen as Trittin harangued
ministers for refusing to accept his new compromise proposal
What are you doing trying to talk us into a compromise when you are
the problem? asked the Austrian Environment Minister, Martin
Bartenstein. Denmarks Sven Auken was almost screaming with anger
and Frances Dominique Voynet boomed: We cannot leave this room
to tell the press and the public that we have dropped our trousers for
the car industry! The only support for Trittins trousers came from
the UKs Michael Meacher, who announced he was not performing a
U-turn but had been told to reverse his stance by Premier Tony Blair
under pressure from Schrder.71
The Council then noted the impossibility of securing at this point a qualified majority in
favor of the text and decided to pass the issue for further discussion on to the Finnish
Presidency.72 The incoming Finnish Presidency vowed to push for a swift agreement on
the dossier despite German intransigence on the issue.73 Since it was obvious from its Uturn that the German delegation strongly exaggerated the unmanageability of its domestic
pressure for non-compliance, it took only three more weeks of deliberations for the
Council substructure to form a qualified majority in favor of the proposal and against a
recalcitrant German delegation.74 The Ministers, in turn, decided to avoid a debate on the
issue and adopted the common position by means of a written procedure.75 It was adopted
as an A-item at the following Council at the end of June.76
German car manufacturers subsequently turned to the European Parliament for support,77
which in its final vote indeed tabled various amendments that were intended to lower
carmakers expected costs.78 The Council largely stood to its common position,79 and also
the Commission declared that it did not approve of Parliaments amendments.80 Council
and Parliament consequently convened a conciliation committee that slightly modified
the original text.81
In sum, the case of the ELV directive shows how the conditionality of the Presidencys
informal authority. The German Presidencys attempts to abuse its prerogatives for
personal gains met with very strong resistance. The member states clearly agreed that the
government in charge is not in a position to adjudicate on claims for flexibility if it itself
71

http://www.europeanvoice.com/article/imported/car-recycling-backdown-skids-into-tvtrouble/38971.aspx, accessed 14 May 2011.

72
Agence Europe 1999e.
73
European Voice 1999d.
74
Die Welt 1999b.
75
Agence Europe 1999f, Die Welt 1999a.
76
Council of the European Union 1999.
77
Agence Europe 1999b, European Voice 1999c.
78
Financial Times 1999.
79
Council of the European Union 2000b.
80
European Voice 1999a.
81
Agence Europe 2000.

19

demands that the Commission proposal be altered. The negotiation was quickly resumed
as soon as the subsequent Finnish Presidency picked it up. Contrary to the expectations of
classical regime theory, Germany was unable to use its prerogatives simply by virtue of
its office. Power-based institutionalism is also unable to explain the governments
behavior in this case. Germany, as the dominant state in the Single Market, should have
been able to assert itself against a coalition of small states and make use of the practices
of informal governance. Conversely, it would have continued its intransigence under the
subsequent presidency of a small government.

Conclusion
An intriguing question in institutional analysis is how states commit to cooperation and at
the same time react flexibly to change in their strategic environment. This is difficult
when the circumstances surrounding demands for flexibility are not perfectly observable,
because this ambiguity opens the backdoor for defection under a different label. The bulk
of the literature analyzes how formal flexibility mechanisms allow governments to
distinguish between legitimate and false demands for discretion. Yet these predominantly
formal studies are based on implausible assumptions of actors knowledge about future
demands for flexibility. In reality, most of these mechanisms will turn out to be too vague
to be operational in practice, and so their use will require a great deal of political
judgment on the basis of situational information. The availability of situational
information, however, renders the formal mechanisms largely redundant, since all states
have an incentive to accommodate a government tacitly when this allows them to uphold
the highly beneficial level of cooperation. The crux of the aforementioned problem is
therefore not formal institutional design. It is the question of how governments elicit
situational information in order to make formal commitments workable in a volatile
strategic environment.
This paper embedded the study of this question in an analysis of the Council Presidencys
informal authority in the EUs legislative process. This process constitutes a strong
commitment to economic integration, since it allows in many ways for imposing
integrative outcomes on one or more recalcitrant governments. The commitment must be
considered fragile, however, because unforeseen shifts in patterns of interdependence
may suddenly generate unmanageable pressure for defection. Situations like this require a
departure from formal procedures with a view to accommodating the government under
pressure in order to avert that unauthorized defection gradually erode the value of the
commitment. Since the conditions that justify flexibility may not be obvious to all actors
involved, the authority to adjudicate on such claims is delegated to the Council
Presidency on conditions that the government in charge has no incentive to misrepresent
the actual necessity to accommodate another government. This arrangement induces
other governments to increase the level of available information in order to prevent the
Presidency from rendering a false and unfavorable judgment.
While existing studies analyzed whether the Presidencys informal prerogatives give it a
competitive edge in intergovernmental negotiations, this paper chose to investigate
Presidencys informal authority at the level of behavior. The theory yielded three testable
20

implications that were derived from the expectation that governments seek to provide the
context for the government in charge to perform its adjudicatory function. These
implications were traced using a mix of qualitative and quantitative methods and in light
of the predictions of alternative theories. First, it was demonstrated that the Presidencys
informal prerogatives in negotiations are directly linked to its informal control of the
agenda, since it needs to stall issues for which it is unable to wield authority. Second, we
showed that it takes on average longer, everything else being constant, to adopt issues on
which one or more governments in office face a conflict of interest. This was interpreted
as further evidence that these issues are dropped from the agenda. Third, and finally, the
case study of the ELV directive showed that member states stop paying deference to the
government in office when it suddenly has an incentive to misrepresent the demand for
flexibility. Neither classical regime theory, which argues that the Presidencys
prerogatives serve to resolve agenda-setting and bargaining failure in intergovernmental
negotiations, nor power-based institutionalism, which expects the Presidencys informal
authority to be endogenous to power, were able to account for these curious practices.
Are the findings generalizable beyond the case of the European Union? The theory
applies more generally to international institutions when a couple of scope conditions are
met. First, the formal commitment is of very high, general value so that all cooperating
actors consider it worth preserving. This is arguably true for other forms of voluntary
cooperation that are propped up by formal commitments. Second, patterns of societal
interdependence are subject to unpredictable fluctuations that disturb the distribution of
the costs and benefits of cooperation at the domestic level. The theory is therefore
unlikely to apply to areas like security where preferences are less volatile, but it can be
expected to hold in the realm of economic integration where patterns of interdependence
are far more erratic. Its testable implications, however, will vary with the design of the
formal commitment.

21

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25

Duration of negotiations
pres
conflict
majority
epinvolve

Model 1 (epinvolve)

Model 2 (epstrong)

37.0209***
(6.677)
7.3042
(5.246)
-4.9544
(6.873)
14.3327
(10.345)

38.6998***
(6.136)
7.2156
(4.848)
-12 9259*
(6.846)

epstrong
_cons
Number of obs
Adj R-squared
* 0.10, ** 0.05, *** 0.01 significance

9.8023
(12.102)
43
0.5842

13.4183***
(4.572)
21.1332***
(6.030)
43
0.6427

26