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Varieties of Capitalism Flashcards

1
Q

5 areas of coordination in VoC framework

A
  1. Industrial relations
  2. Vocational training and education
  3. Corporate governance
  4. Inter-firm relations
  5. Intra-firm relations w/employees
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2
Q

Evidence of overlap between VoC and welfare state types?

A

Schroder (2009)

  1. “Remarkable overlap”
    (i) Almost all LMEs = liberal welfare states
    (ii) Almost all CMEs = social democratic/conservative
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3
Q

Evidence of firms’ support for social protection in CMEs? Why?

A

Mares (2001)

  1. Firms likely to support greater social protection in CMEs
  2. Employers relying on industry-specific skills have strong interest in social insurance systems which incentivise workers to invest in such skills
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4
Q

Evidence of relationship between VoC and electoral systems?

A

Soskice (2006)

  1. Strong correlation between VoC and electoral systems
    (i) CMEs – PR
    (ii) LMEs – majoritarian
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5
Q

What goods/services do CMEs specialise in? Examples?

A
  1. Goods/services that require incremental innovation

2. e.g. consumer durables, transport, cars, machine tools, craft goods)

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6
Q

What goods/services do LMEs specialise in? Examples?

A
  1. Goods/services that require radical innovation

2. e.g. biotech, financial services, defence, technology

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7
Q

Why do firms in LMEs focus on radical product innovation?

A
  1. Start-up risk-oriented capital (e.g. venture capital allows rapid funding for new ideas)
  2. Flexible labour readily available (easy to hire new staff to develop new product, but fire if things go wrong)
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8
Q

Evidence of liberalisation within Germany

A
  1. Hopner and Jackson (2001)
    (a) Changes in ownership structure of German companies, w/moves to Anglo-American shareholder value style of capitalism
  2. Kinderman (2005)
    (a) Increasingly aggressive business community in Germany, incl. employer associations
  3. Hall and Soskice (2003)
    (a) Measures to expand use of temporary employment contracts and exempt low-wage jobs from social charges indicate increased flexibility and liberalisation of German labour market
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9
Q

Evidence that absence of politics problematic for VoC

A
  1. Goodin (2003)

(a) Thatcher in UK
(b) Radical changes to industrial relations, social policy, welfare and labour market policy cannot be attributed to firm interests, as VoC framework would

  1. Menz (2017)
    (a) German and Scandinavian representation of workers on boards
    (b) Due to sustained struggles by left-wing parties and trade unions
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10
Q

Evidence of role of ideology and elites in radical change (VoC)?

A
  1. Valdes (1995) – pivotal role of Chicago-educated Chilean economists that led country’s radical embrace of neo-liberalism in 70s
  2. Menz (2017) - radical liberal market reforms in 80s driven, in large part, by small elite in New Zealand treasury
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11
Q

Factors that contribute to CMEs’ focus on incremental product innovation?

A
  1. Training system - provides industry-specific skills necessary so workers can come up w/small innovations
  2. Secure employment - gives workers freedom to suggest incremental changes
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12
Q

Example of system-affirming response in LMEs/CMEs to external shock?

A

Exogenous shock threatens returns to existing activities

  1. LMEs – holders of mobile assets seek to make markets more fluid and accept more deregulation (to ‘exit’ and seek higher returns)
  2. CMEs – holders of specific assets oppose more market competition (to defend existing activities)
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13
Q

Institutional complementarity between labour relations and training systems?

A
  1. (i) Labour relations based on high job mobility and firm-level wage setting
    (ii) Workers have strong incentives to acquire general skills
    (iii) So training systems that provide general skills more efficient
  2. (i) Labour relations based on strong unions and coordinated wage bargaining
    (ii) Efficient for firms to operate collaborative training schemes giving industry-specific skills
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14
Q

Institutional complementarity between corporate governance and inter-firm relations?

A
  1. (i) Fluid capital markets facilitate movement of funds
    (ii) So more efficient for firms to access technology via merger/acquisitions or new personnel, rather than long-term collaboration
  2. (i) Corporate governance limits demands to maximise current profitability
    (ii) Easier to collaborate w/other firms
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15
Q

Empirical evidence of enduring cross-national institutional differences along CME/LME lines? Evidence of any change?

A

Hall and Gingerich (2009)

a. Persistent cross-national institutional differences despite intense convergence pressures
b. Though some liberalisation in CMEs

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16
Q

Evidence that median voter in CMEs/LMEs different wrt skills and welfare preferences

A

Iversen and Soskice (2001)

  1. Median voter in CMEs typically has specific skills and supportive of welfare state
  2. Median voter in LME typically has general skills and more hostile to welfare state
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17
Q

Exceptions to correspondence between welfare state regimes and VoC?

A

(i) Britain – LME, yet publicly funded, universal, free-at-point-of-use healthcare
(ii) Japan and Netherlands – CMEs, yet EA uncertain how to classify
(iii) Norway, Ireland – “potential outliers” w/Schroders’ empirical tests

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18
Q

Schroder (2009)

A

EMPIRICAL OVERLAP BETWEEN VoC and WELFARE REGIMES

  1. “Remarkable overlap”
    (i) Almost all LMEs = liberal welfare states
    (ii) Almost all CMEs = social democratic/conservative
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19
Q
  1. “Remarkable overlap”
    (i) Almost all LMEs = liberal welfare states
    (ii) Almost all CMEs = social democratic/conservative
A

Schroder (2009)

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20
Q
  1. Welfare states = insurance systems that accompany different patterns of skill formation
  2. Why?
A

Iversen and Soskice (2009)

1a. Industry-specific = greater labour market risks (skills less transferable), so greater need/demand for income support and social insurance
1b. Therefore CMEs have higher decommodification (i.e. social democratic/conservative welfare states)

2a. General = less labour market risk (skill portable), so less demand/need for generous benefits
2b. Therefore LMEs have lower decommodification (i.e. liberal) w/greater means-testing

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21
Q
  1. Strong correlation between VoC and electoral systems
    (i) CMEs – PR
    (ii) LMEs – majoritarian
A

Soskice (2006)

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22
Q

Mares (2001)

A

FIRMS SUPPORT SOCIAL PROTECTION IN CMES

  1. Firms likely to support greater social protection in CMEs
  2. Employers relying on industry-specific skills have strong interest in social insurance systems which incentivise workers to invest in such skills
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23
Q

Hall and Gingerich (2009)

A

PERSISTENCE OF VoC DIFFERENCES

1a. Persistent cross-national institutional differences despite intense convergence pressures
1b. Though some liberalisation in CMEs

INSTITUTIONAL COMPLEMENTARITIES

2a. Evidence supports institutional complementarities in labour relations and corporate governance
2b. “Impressed with the uniformity of the results”

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24
Q

Valdes (1995)

A

ROLE OF ELITES/IDEOLOGY

Pivotal role of Chicago-educated Chilean economists that led country’s radical embrace of neo-liberalism in 70s

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25
Q

Menz (2017)

A

ROLE OF ELITES/IDEOLOGY

  1. Radical liberal market reforms in 80s driven, in large part, by small elite in New Zealand treasury

ROLE OF POLITICS

  1. German and Scandinavian representation of workers on boards due to

USA INNOVATION

3a. US military research at forefront of cutting-edge innovation
3b. Government funding vital to large research budgets

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26
Q

Hopner and Jackson (2001)

A

CME LIBERALISATION

Changes in ownership structure of German companies, w/moves to Anglo-American shareholder value style of capitalism

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27
Q

Goodin (2003)

A

ROLE OF POLITICS

  1. Thatcher in UK
  2. Radical changes to industrial relations, social policy, welfare and labour market policy cannot be attributed to firm interests, as VoC framework would
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28
Q

Soskice (2006)

A
  1. Strong correlation between VoC and electoral systems
    (i) CMEs – PR
    (ii) LMEs – majoritarian
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29
Q

Empirical evidence of institutional complementarities in VoC?

A

Hall and Gingerich (2009)

1a. Evidence supports institutional complementarities in labour relations and corporate governance
1b. “Impressed with the uniformity of the results”

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30
Q

Hall and Soskice (2003)

A

Example (Germany)

  1. Measures to expand use of temporary employment contracts and exempt low-wage jobs from social charges
  2. Indicates increased flexibility and liberalisation of German labour market
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31
Q

Example (Germany)

  1. Measures to expand use of temporary employment contracts and exempt low-wage jobs from social charges
  2. Indicates increased flexibility and liberalisation of German labour market
A

Hall and Soskice (2003)

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32
Q

Ahlquist and Breunig (2012)

A

Model-based clustering analysis provides weaker and conflicting evidence for VoC clustering

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33
Q

Model-based clustering analysis provides weaker and conflicting evidence for VoC clustering

A

Ahlquist and Breunig (2012)

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34
Q

Counter-evidence to empirical VoC clustering?

A

Ahlquist and Breunig (2012)

Model-based clustering analysis provides weaker and conflicting evidence for VoC clustering

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35
Q

Hall and Gingerich (2002)

A

INSTITUTIONAL COMPLEMENTARITY AND ECONOMIC EFFICIENCY

  1. Measure degree of strategic coordination in labour relations and corporate governance
  2. ‘Composite coordination index’ has U-shaped relationship w/economic growth
  3. Strong support for prediction of institutional complementarity that more ‘coherent’ political economies have efficiency advantage
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36
Q
  1. Measure degree of strategic coordination in labour relations and corporate governance
  2. ‘Composite coordination index’ has U-shaped relationship w/economic growth
  3. Strong support for prediction of institutional complementarity that more ‘coherent’ political economies have efficiency advantage
A

Hall and Gingerich (2002)

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37
Q

Evidence that institutional ‘coherence’ provides economic efficiency advantage

A

Hall and Gingerich (2002)

  1. Measure degree of strategic coordination in labour relations and corporate governance
  2. ‘Composite coordination index’ has U-shaped relationship w/economic growth
  3. Strong support for prediction of institutional complementarity that more ‘coherent’ political economies have efficiency advantageefficiency advantage
38
Q

Examples of MMEs (mixed market economies)?

A

Italy, Spain

39
Q

Kenworthy (2005)

A
  1. Little support for relationship between institutional coherence and variation in economic performance
  2. But aggregate-level analyses limited in ability to provide info and need to develop better, more fine-grained measures
40
Q
  1. Little support for relationship between institutional coherence and variation in economic performance
  2. But aggregate-level analyses limited in ability to provide info and need to develop better, more fine-grained measures
A

Kenworthy (2005)

41
Q

Counter-evidence that institutional ‘coherence’ provides economic efficiency advantage

A

Kenworthy (2005)

  1. Little support for relationship between institutional coherence and variation in economic performance
  2. But aggregate-level analyses limited in ability to provide info and need to develop better, more fine-grained measures
42
Q

Explain the mutually reinforcing relationship between VoC and welfare regimes

A
  1. Welfare varieties shaped by need for social insurance against labour market risks (which differ due to VoC via skill formation mechanism)
  2. Once established, welfare state types shape incentives to invest in certain skill types
  3. Example - low decommodification in LMEs further incentivises investment in general skills (self-reinforcing cycle)
  4. Temporal order may vary, but 2-way dynamic relationship explains tendency for LME/liberal and CME/conservative/social democratic
43
Q

Estevez-Abe et al (2001)

A

Cross-class alliance key to explaining resilience of welfare states in European CMEs

44
Q

Cross-class alliance key to explaining resilience of welfare states in European CMEs

A

Estevez-Abe et al (2001)

45
Q

Iversen and Soskice (2006)

A
  1. Coalitional dynamics associated w/electoral systems systematically produce certain governments (due to incentives faced by decisive party representing middle-class)

2a. PR produces centre-left ~¾ of time
2b. Majoritarian produced centre-right ~¾ of time

  1. Majoritarian 2 party systems:
    (i) Left an right parties have incentive to offer centrist platforms to win middle-class votes
    (ii) But no guarantee either won’t defect to true preference after election
    (iii) Middle-class voters fear being taxed more than low taxes for all, so votes for right
  2. PR 3+ party systems:
    (i) 3 parties, each representing true preferences (so no defection risk)
    (ii) Middle-income voters support middle-class party
    (iii) Middle-class party can enter into coalition with left and jointly tax rich
46
Q

Avenues for future research on potential endogeneity of electoral institutions to VoC/welfare state outcomes?

A
  1. Within-country studies over longer time period to better isolate causal effects and account for impact of different variables introduced at different times
  2. Study countries that have changed electoral systems:
    (i) New Zealand – moved to PR system
    (ii) Japan
47
Q

Iversen, Soskice and Cusack (2007)

A

ECONOMIC ORIGINS OF ELECTORAL SYSTEMS

  1. Right/centre-right parties controlled >50% parliamentary representation in almost all PR countries in last 100 years, yet almost no attempts to adopt majoritarian systems
  2. Indicates left strength may not be key reason for adoption of PR
  3. Instead, key to understanding electoral choice = differences in economic structures at end of 19th century
  4. Right parties chose majoritarian institutions as protection against rising left where:
    (a) Primary division of conflict = class/redistribution due to:
    (i) Local economic coordination traditionally low
    (ii) Employers in conflict w/craft-based unions
  5. Right parties chose PR where:
    (a) Economy grew out of local coordination where employers and unions had common interest in regulatory system + social insurance to protect investments in co-specific assets
48
Q
  1. Right/centre-right parties controlled >50% parliamentary representation in almost all PR countries in last 100 years, yet almost no attempts to adopt majoritarian systems
  2. Indicates left strength may not be key reason for adoption of PR
A

Iversen, Soskice and Cusack (2007)

49
Q

Kinderman (2005)

A

Increasingly aggressive business community in Germany, incl. employer associations

50
Q

Empirical evidence of liberalisation within CMEs?

A
  1. Hall and Gingerich (2009)
    (a) empirical analysis of VoC shows liberalisation in CMEs since 80s
  2. Pontusson (2005)
    (a) OECD data shows that strictness of government regulation of temporary employment significantly decreased in 6/9 European CMEs from 80s-90s
    (b) Larger avg. decrease than LMEs in sample (if Ireland excluded)
51
Q

Pontusson (2005)

A

(a) OECD data shows that strictness of government regulation of temporary employment significantly decreased in 6/9 European CMEs from 80s-90s
(b) Larger avg. decrease than LMEs in sample (if Ireland excluded)

52
Q

Campbell et al (2006)

A

Firms traditionally reliant on specific skills continue to do so

53
Q

Hassel and Williamson (2004)

A

Wages rarely as coordinated as 20 years ago, but extensive wage coordination in CMEs remains

54
Q

Wages rarely as coordinated as 20 years ago, but extensive wage coordination in CMEs remains

A

Hassel and Williamson (2004)

55
Q

Firms traditionally reliant on specific skills continue to do so

A

Campbell et al (2006)

56
Q

Fioretos (2001)

A

THATCHERITE REFORMS CAUSED PARTLY BY PRESSURES FROM WITHIN SYSTEM

  1. Pre-Thatcher Britain – strong trade union power + corporatist practices + prominent and open financial markets + strong business associations = unsustainable
  2. Pressure to reform - mix of CME-style and LME-style institutions weakened British competitiveness
  3. Role of Thatcher important, but pressure to reform came from contradictions within system
57
Q

Streeck and Thelen (2005)

A
  1. Path dependence and equilibrium concepts in VoC mean it better explains institutional stability than change
  2. Propose 5 modes of change to enhance theoretical framework:
    (i) Displacement
    (ii) Layering
    (iii) Drift
    (iv) Conversion
    (v) Exhaustion
58
Q

Mahoney and Thelen (2010)

A

VoC CHANGE DUE TO INSTITUTIONS + POLITICAL CONTEXT

  1. Incorporate role of politics by developing VoC framework
  2. Institutional change = nature of institutions + political context
59
Q

VoC CHANGE DUE TO INSTITUTIONS + POLITICAL CONTEXT

  1. Incorporate role of politics by developing VoC framework
  2. Institutional change = nature of institutions + political context
A

Mahoney and Thelen (2010)

60
Q
  1. Path dependence and equilibrium concepts in VoC mean it better explains institutional stability than change
  2. Propose 5 modes of change to enhance theoretical framework:
    (i) Displacement
    (ii) Layering
    (iii) Drift
    (iv) Conversion
    (v) Exhaustion
A

Streeck and Thelen (2005)

61
Q

(a) OECD data shows that strictness of government regulation of temporary employment significantly decreased in 6/9 European CMEs from 80s-90s
(b) Larger avg. decrease than LMEs in sample (if Ireland excluded)

A

Pontusson (2005)

62
Q

Evidence that employment regulation become less strict in CMEs?

A

Pontusson (2005)

(a) OECD data shows that strictness of government regulation of temporary employment significantly decreased in 6/9 European CMEs from 80s-90s
(b) Larger avg. decrease than LMEs in sample (if Ireland excluded)

63
Q

ROLE OF POLITICS

  1. Thatcher in UK
  2. Radical changes to industrial relations, social policy, welfare and labour market policy cannot be attributed to firm interests, as VoC framework would
A

Goodin (2003)

64
Q

CME LIBERALISATION

Changes in ownership structure of German companies, w/moves to Anglo-American shareholder value style of capitalism

A

Hopner and Jackson (2001)

65
Q

ROLE OF ELITES/IDEOLOGY

Pivotal role of Chicago-educated Chilean economists that led country’s radical embrace of neo-liberalism in 70s

A

Valdes (1995)

66
Q

ROLE OF ELITES/IDEOLOGY

  1. Radical liberal market reforms in 80s driven, in large part, by small elite in New Zealand treasury

ROLE OF POLITICS

  1. German and Scandinavian representation of workers on boards due to sustained struggles by left-wing parties and trade unions
A

Menz (2017)

67
Q

FIRMS SUPPORT SOCIAL PROTECTION IN CMES

  1. Firms likely to support greater social protection in CMEs
  2. Employers relying on industry-specific skills have strong interest in social insurance systems which incentivise workers to invest in such skills
A

Mares (2001)

68
Q
  1. Pre-Thatcher Britain – strong trade union power + corporatist practices + prominent and open financial markets + strong business associations = unsustainable
  2. Pressure to reform - mix of CME-style and LME-style institutions weakened British competitiveness
  3. Role of Thatcher important, but pressure to reform came from contradictions within system
A

Fioretos (2001)

69
Q

Instead, key to understanding electoral choices = differences in economic structures at end of 19th century

A

Iversen, Soskice and Cusack (2007)

70
Q

Counter-argument to idea that radical innovation = product of LME deregulation etc?

A

Menz (2017)

  1. US military research at forefront of cutting-edge innovation
  2. Government funding vital to large research budgets
71
Q
  1. US military research at forefront of cutting-edge innovation
  2. Government funding vital to large research budgets
A

Menz (2017)

72
Q

Key roles of the state in a political economy?

A
  1. Creates and enforces rules of the game
  2. Structures power resources of capital vs labour
  3. Shapes role played by finance
  4. Redistributes resources
  5. Acts as arbiter for resource allocation
73
Q
  1. Define culture

2. Why is there scepticism towards cultural explanations in CPE?

A
  1. Culture = shared sets of understanding that underpin and give meaning to social interactions, habits/practices, norms, values + political/economic institutions

2a. Not well defined
2b. Hard to operationalise

74
Q

Key axis of difference among CMEs?

A

INDUSTRY-BASED COORDINATION vs GROUP-BASED COORDINATION:

(i) Group-based (e.g. Japan) – business networks = families of companies w/close cross-sector connections
(ii) Industry-based (e.g. Germany) – coordination depends on business associations/trade unions (primarily along industry lines)

75
Q

Implication of differences in coordination among CMEs (industry vs group based) for cooperation between companies?

A
  1. Industry-based (e.g. Germany) – companies in same sector often cooperate in training and technology
  2. Group-based (e.g. Japan) – companies sharply competitive within same industry and cooperation more likely among firms in different sectors, but within ‘family’ of companies
76
Q

Examples of CME institutions?

A
  1. Powerful employer associations
  2. Strong trade unions
  3. Networks of cross-shareholding
  4. Legal systems designed to facilitate information-sharing and collaboration
77
Q

Why are institutional differences between political economies tied to history?

A

repeated historical experience builds up common expectations that allow actors to coordinate effectively w/each other

78
Q

Knetter (1989)

A
  1. RESULTS - systematically different response of firms in UK (LME) and Germany (CME) to exchange rate appreciation

(i) UK – firms tend to pass price increase on to customers to maintain profitability
(ii) Germany – firms tend to maintain prices and accept lower returns in order to preserve market share

  1. EXPLANATION:
    (i) Firms in LMEs must maintain current profitability (access to capital and resisting takeover), but can sustain loss of market share because fluid labour markets allow them to lay off workers quickly
    (ii) Firms in CMEs can sustain decline in profitability because financial system provides access to capital independent of current profitability (e.g. based on reputation), whilst retention of market share important because labour institutions make lay-offs difficult
79
Q

Systematically different response of firms in UK (LME) and Germany (CME) to exchange rate appreciation

(i) UK – firms tend to pass price increase on to customers to maintain profitability
(ii) Germany – firms tend to maintain prices and accept lower returns in order to preserve market share

A

Knetter (1989)

80
Q

Evidence of different responses of firms to external shock in CME/LME?

A

Knetter (1989)

  1. RESULTS - systematically different response of firms in UK (LME) and Germany (CME) to exchange rate appreciation

(i) UK – firms tend to pass price increase on to customers to maintain profitability
(ii) Germany – firms tend to maintain prices and accept lower returns in order to preserve market share

  1. EXPLANATION:
    (i) Firms in LMEs must maintain current profitability (access to capital and resisting takeover), but can sustain loss of market share because fluid labour markets allow them to lay off workers quickly
    (ii) Firms in CMEs can sustain decline in profitability because financial system provides access to capital independent of current profitability (e.g. based on reputation), whilst retention of market share important because labour institutions make lay-offs difficult
81
Q

Aoki (1994)

A

long-term employment more feasible where financial system provides capital on terms not sensitive to current profitability

82
Q

long-term employment more feasible where financial system provides capital on terms not sensitive to current profitability

A

Aoki (1994)

83
Q

What does willingness of firms and workers to participate in collaborative vocational training schemes depend on?

A
  1. Firms’ willingness to participate depends on belief that firms not investing in training won’t poach extensively
  2. Workers’ willingness to participate depends on assurances that training will result in secure, well-paid employment
84
Q

How are CMEs able to provide firms with ‘patient capital’, not dependent on short-term profitability?

A
  1. Dense networks link personnel in company to other firms, w/reliable information about firm progress shared
  2. Strong business associations – monitor firms and sanction misleading information
  3. Reputation – importance means firms deterred from providing false information
  4. Cross-shareholding – extensive networks of cross-shareholding provide inside information about firms’ progress
85
Q

How are CMEs able to provide industry-wide training schemes, despite risk of free-riding and poaching?

A
  1. Strong industry-wide employer associations and trade unions supervise a publicly subsidised training system
  2. Free-riding limited – all major firms pressured to take on apprentices
  3. Industry-wide wage-setting means firms can’t entice workers away w/higher wages
86
Q

How do CMEs encourage inter-firm collaboration and technology sharing?

A
  1. Business associations – help coordinate publicly subsidised technology programmes
    (i) Common technical standards – fostered by industry associations help diffuse new technologies
  2. Contract law – encourages relational contracting among companies
    (i) Rationale – tightly written formal contracts insufficient to promote close inter-firm technology collaboration, due to many possible contingencies
    (ii) Example (German courts) – allow v. open-ended clauses in inter-firm contracts, as long as they’re grounded in prevailing industry standards
87
Q

How have Japanese firms historically incentivised investment in firm/group specific skills? What type of skills in particular?

A
  1. Guarantees of lifetime employment by families of companies
  2. Strong relational skills within family of companies
88
Q

Example of way in which France is distinctive to LME/CME ideal types in VoC?

A
  1. Inter-firm collaboration – based on career patterns that has led many managers of top firms through small no. elite schools and public service, before taking up private sector roles
  2. Consequence – many top French managers have close ties to the state, but weak ties to rest of business community
  3. Implication – more likely to look to state for assistance than German or UK counter-parts
89
Q

Why are firms and government likely to resist deregulation in face of globalisation in CMEs?

A
  1. Firms draw competitive advantages from systems of relational contracting (which depend on supportive regulatory regimes)
  2. Firms and workers have common interests to defend (due to investment in co-specific assets, like industry-specific skills)
90
Q

How does globalisation put pressure on availability of patient capital?

A
  1. Increased importance of international capital, esp. for large firms
  2. Problem - international investors prefer arms-length terms emphasising public data (due to their inability to closely monitor firm progress)

CPE (5 decks)

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