Cooperation against the odds: How overarching institutions can drive local upgrading in a multi-level polity

Cooperation among economic actors is known to be an important way of enhancing productivity in economies characterised by high fragmentation in land and business ownership, with significant implications for local economic development and thus also for territorial inequalities (North 1990; Ferguson 2014 and 2021; McDermott 2007). The challenge is that such cooperation is often thwarted by complex collective action problems that are particularly difficult to resolve in institutionally thin, low-trust settings. How can such problems be overcome? My paper argues that macro-level institutional frameworks, such as regulatory and expenditure policies, play a crucial role in facilitating or hindering local-level efforts to catalyse cooperation for economic upgrading. Applying Ostrom’s (1990) concept of “facilitative political regimes”, I suggest that overarching institutional frameworks which create arenas for decision-making and dispute resolution, decrease the costs associated with enforcing local rules, and offer technical assistance for the management of collective goods, can mitigate the obstacles to local-level cooperation, thus contributing to the reduction of place-based inequalities. Importantly, in a multi-level polity, facilitative overarching institutions that are not available at one level (e.g. nationally) can also be made available at another level (e.g. at the EU level). The paper is based on a within-country comparison of four case study areas in Greece, which is itself an unlikely setting for the emergence of cooperation, and draws on qualitative empirical evidence collected through interviews, documentary evidence and the local press. The case studies are set up as matching pairs, including one area where specific types of cooperation were observed, and an otherwise similar area where such patterns of cooperation failed to occur, in each pair. The first pair of matching cases focuses on the wine sector, while the second pair focuses on the alternative tourism sector, providing with an opportunity to assess the impact of different sectoral frameworks on local cooperative efforts. The paper emphasises the role of the EU’s agricultural and cohesion policies, which are shown to act, to different extents, as “facilitative political regimes”, compensating for some of the deficiencies in the Greek domestic macro-institutional framework and playing a crucial enabling role for the emergence of local productive synergies. In so doing, the paper builds on existing studies of the impact of different EU policies on economic local development (e.g. Bruszt and McDermott 2012, Bruszt and Langbein 2014). By analysing how regulatory and expenditure policies at different levels can reshape local governance arrangements and foster cooperation, the paper contributes to our understanding of the process of triggering economic upgrading in unfavourable contexts, thereby reducing territorial inequalities. There is a growing recognition that profound political instability can result from the collapse of people’s economic life chances not only along the lines of social class, but also along the lines of place (Jennings and Stoker 2019; Rodrik 2018; Rodríguez-Pose 2018). In this context, utilising the concepts, models and methods of political economy to study the factors that influence territorial differences in economic performance seems particularly pertinent, and it is to this direction that the paper aspires to contribute.