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A Theory of Strategic Monitoring and Compliance in Common Regulatory Regimes

Thu, August 31, 12:00 to 12:30pm, Hilton Union Square, Grand Ballroom


What are the consequences of common regulatory regimes on intra-regime trade? In this paper, I propose a formal theory of monitoring and compliance in multi-level and federal regulatory regimes, such as the European Union (EU), with a bureaucracy that monitors compliance and a court that adjudicates disputes. I show that the consequences of regulatory regimes on intra-regime trade depend on strategic interactions between member states, the bureaucracy, and the court. Building on the most recent advances in international trade theory, I micro-found the preferences of these actors in an economy to show how variation in firm productivity across member states affects the degree to which the rules of the regime are properly implemented. The model allows me to explore important questions in the literature. How closely do member states implement the rules of the regime? When does the bureaucracy bring noncompliance cases against member states? When do third-party member states intervene on the side of the defendant, to sustain their noncompliance, and when do they intervene on the side of the plaintiff, to bring the defendant into compliance? When does the court rule against member states? To what extent do member states come back into compliance after adverse court rulings? My theory has important theoretical implications for the effectiveness of international institutions and the depth of cooperation in common regulatory regimes.