So far, most research on differentiated integration has focused either on its causes or on its broader consequences for the process of European integration. In contrast, in this paper we apply a public policy approach. Through an analysis of the functioning of various differentiated governance arrangements that exist in the EU economic policy field (particularly governing the EMU, the EU energy sector and the access of third countries into the Single Market) we aim to understand under which conditions differentiated procedures and institutions prove to be effective in attaining the stated objectives and in adjusting to changing circumstances while minimising undesirable effects. Doing so, we make two contributions to the existing scholarship. First, we develop an encompassing and dynamic definition of policy effectiveness that allows us to assess and compare the performance of economic differentiated integration arrangements. Second, we identify a number of institutional factors that positively influence the effectiveness of EU differentiated economic policy arrangements. These include (1) institutional set-ups tailor-made to the policy objectives of the differentiated organisation, (2) unified, simple and clear governance frameworks, (3) adaptable and flexible institutional designs and (4) institutional provisions to include nonparticipating and third countries. The theoretical framework presented in this paper to study the conditions under which differentiated integration is effective may inspire the research agenda on differentiated integration also beyond the economic policy field.