Policy Recommendations, Institutions and Culture: Evidences from the European Semester

Abstract

Since 2010, the European Union has been negotiating structural reforms with Member States by tailoring reforms to the specificities of each country – the European Semester’s Country Specific Recommendations — and the European Commission has been assessing each Member State’s progress on implementation, resulting into a unique dataset on reforms implementation in 27 OECD countries for 14 years. We investigate to what extent (formal and informal) institutional frameworks influence reforms implementation, being able to consider different classes of policies (e.g. fiscality, pensions, etc.). Our results highlight that formal institutions (approached through the World Governance Indicators, WGI) matter: higher-quality governance systems require fewer reforms and facilitate their implementation. Second informal institutions (approached thanks to the Culture Factor Group/Hostede indicators) also play a role: cultural traits – particularly, a preference for cooperation and collective achievement, greater tolerance of uncertainty, long-term orientation, and an openness towards meeting individuals’ needs (as opposed to normative restraints) – favor CSR compliance. We are also able to contrast the impact of governance and cultural factors across classes of policies, which allow to draw lessons for structural reforms strategies given the institutional context.