National representation in supranational institutions: The case of the European Central Bank

Supranational institutions face an important trade-off when hiring personnel. On the one hand, hiring decisions are based, as in most organizations, on a candidate's professional qualifications. On the other hand, supranational institutions often aim for broad national representation. Reviewing evidence from the European Central Bank, we show that nationality is indeed relevant for both hiring and decision-making. Specifically, we find a disproportionately narrow spread of national representation in the top management of the ECB. Further, there is evidence for the existence of national networks between adjacent management layers. Finally, monetary policy decisions seem to be linked to national representation in the core business areas of the ECB. Examining a sample of 27 European countries over the period from 1999 to 2008, we estimate Taylor rules for alternative sets of euro area aggregates derived from different weighting schemes of national macroeconomic data. Our results indicate that weights based on national representation in the mid-level management of the ECB's core business areas best describe the central bank's interest-rate setting behavior. Journal of Comparative Economics 42 (1) (2014) 19-33. WU Vienna, Department of Economics, Althanstrasse 39-45, 1090 Vienna, Austria; Darmstadt University of Technology, Department of Law and Economics, Marktplatz 15, 64283 Darmstadt, Germany; Austrian Institute of Economic Research (WIFO), Arsenal, Objekt 20, 1030 Vienna, Austria; ETH Zurich, KOF Swiss Economic Institute, Weinbergstrasse 35, 8092 Zurich, Switzerland; CESifo, Poschingerstrasse 5, 81679 Munich, Germany. (C) 2013 Association for Comparative Economic Studies Published by Elsevier Inc. All rights reserved.