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AbstractThe global economic crisis has had a significant impact on the EU enlargement region by reducing inflows of external finance. Unemployment has increased in a context of already high long‐term and youth unemployment. As governments seek to restrict their budget deficits there will be little scope for much increase in government expenditure in the near future. These effects of the crisis highlight the need for better policy‐making in the region, drawing on better understanding of the causes of economic and social problems, better appreciation of the range of policy options and their relative chances of success or failure. However, there is a substantial knowledge gap that can only be filled by well‐designed research studies based on research questions that are relevant to the needs of policymakers. In this context, evidence‐based policy‐making techniques have a valuable role to play in improving the policy process. This article points out the specific nature of the policy process in transition countries and the difficulties of formulating rational policy during periods of rapid structural change in which the administrations have become politicized and state capture by big business interests is common. In addition, pervasive policy transfer, often of a coercive nature, is an additional constraint on rational policy‐making. The conflicting advice received from multiple donors and external advisers provides an incentive for playing the system and producing inconsistent policy formulas. The article concludes that there is significant scope for improvement in policy‐making through the use of evidence‐based policy‐making techniques. Governments should, therefore, encourage the use of systematic review and ex‐post evaluation of policy programmes and analysis of natural experiments where possible, while at the same time maintain a realistic awareness of the dangers and distorting effects of the influence of advocacy coalitions, state capture and partyisation of economies.

Over the last twenty years, numerous international assistance programmes have aimed to provide support for reconstruction and assist the policy reform process in the Western Balkans. In this context, concerns have arisen that poor government policies and inadequate donor coordination have reduced the effectiveness of such assistance. The paper discusses the sources of policy success and policy failure of such international assistance programmes within a principal-agent framework that models the influence of misaligned objectives, differing incentive structures, asymmetric information and moral hazard facing the different actors in the institutional structure of assistance programmes. In this political economy approach the varying influences on multiple principals and agents are key determinants of the effectiveness of policy. The paper takes a sectoral view in examining assistance programmes in the vocational education sector, where large donor effort has been applied in the Western Balkans over the last decade to modernise and reform the education system. The specific focus is on secondary vocational education in Serbia. The paper identifies causes of policy failure in EU pre-accession assistance in this key policy area.

Abstract
Summary: This article analyzes the successes and failures of regional cooperation in the Western Balkans through the prism of two policy areas: trade policy and employment policy. It investigates the role of the Stability Pact as a policy broker in mediating the policy conflicts between various national and transnational advocacy coalitions in these two areas. It concludes that regional cooperation in the field of trade policy has been less contested than in the field of employment policy. However, there have been failures in each policy area. Regional cooperation in trade policy while ostensibly successful has threatened to widen economic gaps between countries in the region. Regional cooperation in employment policy has been contested and although levels of employment protection have been reduced, expenditure of active employment policies remains low and unemployment rates remain high especially in the less developed countries in the region.