Structural reforms in Europe and the (in)coherence of institutions

The aim of this article is to analyse the consequences of some structural reforms on the institutional coherence of OECD countries, particularly Continental Europe, and on their economic performance, particularly employment. Because institutions in developed political economies are interrelated through a complex network of complementarities, institutional change has consequences beyond the area concerned by a reform. This also implies that there are complementarity effects in reforms themselves. A challenge of reform programs is therefore to achieve a new type of complementarities between reformed institutions. The paper presents empirical evidence questioning the compatibility of the ongoing structural reforms in product and labour markets with the existing institutional structures in some OECD countries. The coherence of the flexicurity strategy, i.e. a combination of labour market flexibility and generous welfare state, is also questioned, both from economic efficiency and political economy points of view.Structural reforms;, models of capitalism; flexicurity

The political economy of job protection and income redistribution

This paper presents a model allowing to analyze voting, welfare institutions and economic performance. We consider a political economy framework with three classes of agents: entrepreneurs, employed workers and unemployed workers. Agents vote on alternative institutional options: the degree of labour market flexibility and the intensity of redistribution. We show that the welfare state configuration depends on the nature of the political system - majoritarian, coalition, twoparty. Because internationalization reduces the possibility for national government to e.ectively tax profits, the existing political coalition is fragilized by the process of globalization. The model generates results concerning the macroeconomic equilibrium employment level. Hence we can assess the effects of internationalization on macroeconomic performance. The impact of internalization depends on the nature of the political system (majoritarian versus coalition government) and on the institutional configuration (positive flexibility versus positive redistribution).job security ; redistribution ; political equilibriums ; unemployment

Varieties of capitalism and varieties of macroeconomic policy. Are some economies more procyclical than others?

The role of macroeconomic policy in the different varieties of capitalism has been largely ignored. Recent contributions to the literature have argued that nonliberal economies should be expected to have less accommodating (i.e., less countercyclical) macroeconomic policies than liberal varieties. Using time-series cross-section data on 18 OECD countries between 1980 and 2002, this paper tests that hypothesis and, more particularly, whether the reaction of discretionary fiscal policy to macroeconomic shocks is conditioned by variables that differentiate liberal from nonliberal varieties of capitalism: the degree of generosity of the social protection system, the degree of coordination of wage bargaining, and the fragmentation of the political party system. The test results do not support the conclusion that nonliberal economies' macroeconomic policy would be less countercyclical than that of liberal economies. On the contrary, discretionary fiscal policy has been more countercyclical in countries with a fragmented political system or a generous social protection system. -- Die Rolle makroökonomischer Politik in unterschiedlichen kapitalistischen Systemen wurde bisher nur selten eingehend untersucht. Eine neuere Argumentation vertritt die These, dass die makroökonomische Politik in nichtliberalen Ökonomien weniger antizyklisch ausfällt als in liberalen Ökonomien. Das Papier prüft diese These anhand einer gekreuzten Längs- und Querschnittanalyse für 18 OECD-Länder im Zeitraum von 1980 bis 2002. Dabei widmet es sich im Besonderen der Frage, inwieweit finanzpolitische Reaktionen auf makroökonomische Schocks von jenen Variablen beeinflusst werden, die liberale von nichtliberalen Ökonomien unterscheiden: die Generosität des Wohlfahrtssystems, das Ausmaß der Koordinierung von Lohnverhandlungen und der Grad der Fragmentierung des Parteiensystems. Das Ergebnis bestätigt die These nicht, sondern zeigt, dass eine diskretionäre Fiskalpolitik in jenen Ländern antizyklischer ausfällt, die über ein fragmentiertes Parteiensystem oder ein generöses Wohlfahrtssystem verfügen.

La fin du modèle européen ?

International audienceCet article s'interroge sur les conséquences des réformes structurelles sur le ou les modèles(s) européens de capitalisme. Il effectue une analyse critique de l'idéologie de la réforme et isole un certain nombre de ses fondations. Sont présentés certains résultats empiriques qui remettent en question la pertinence de ces dernières. Il ressort que le soutien social aux réformes peut s'interpréter plus facilement en termes de clivages de classe qu'à l'aide des concepts des théories de la modernisation. Ces clivages se retrouvent en grande partie dans la segmentation de l'offre politique. Les difficultés des processus de réformes que connaissent les économies européennes reflètent l'affrontement entre deux modèles de capitalisme. Des tentatives de solutions telles que la " flexicurité " ne sont probablement pas à la hauteur des difficultés

Can financial infrastructures foster economic development?

In this paper, financial infrastructures increase the efficiency of the banking sector: they decrease the market power (due to horizontal differentiation) of the financial intermediaries, lower the cost of capital, increase the number of depositors and the amount of intermediated savings, factors which in turn increase the growth rate and may help countries to take off from a poverty trap. Taxation finances financial infrastructures and decreases the private productivity of capital. Growth and welfare maximising levels of financial infrastructures are computed.Endogenous growth; Imperfect competition; Financial infrastructures

Institutional complementarity and diversity of social systems of innovation and production

"Der vorliegende Beitrag bietet eine Analyse der Institutionen moderner kapitalistischer Volkswirtschaften. Der institutionellen Dimension wird entscheidende Bedeutung beigemessen, wenn es darum geht, die Koexistenz verschiedener kapitalistischer Wirtschaftsmodelle mit sehr unterschiedlichen institutionellen Strukturen zu begründen. Es wird erläutert, warum trotz 'Globalisierung' kein einheitliches Konvergenzmuster zu erwarten ist. Eine institutionelle Analyse moderner Volkswirtschaften, zum Beispiel der sozialen Innovations- und Produktionssysteme, kann mit Hilfe der Konzepte der Komplementarität und Hierarchie von Institutionen erfolgen. Institutionelle Strukturen sind komplementär und definieren somit die Kohärenz sowie das Entwicklungspotential der betreffenden Volkswirtschaften. Die institutionelle Hierarchie beschreibt, welches Glied des Institutionengefüges die anderen steuert, und trägt so zum Verständnis historischer Entwicklungen bei. Der vorliegende Beitrag bietet eine Klassifizierung entwickelter Volkswirtschaften und zieht einige Schlußfolgerungen im Hinblick auf die Nützlichkeit der Begriffe Komplementarität und Hierarchie von Institutionen für die Wirtschaftspolitik." (Autorenreferat)"This article proposes an institutional analysis of modern capitalist economies. It argues that the institutional dimension is crucial if one wants to account for the co-existence of different types of modern developed economies, characterised by substantially different institutional structures. It explains why no generalised pattern of convergence towards the same economic model should be expected, in spite of 'globalisation'. An institutional analysis of modern economies, or social systems of innovation and production, can be made using the concepts of complementarity and hierarchy of institutions. Institutional arrangements are complementary to each other and thus define the coherence as well as the potential for evolution of the various economies. The hierarchy of institution expresses which part of the institutional drives the others and is helpful for understanding historical evolutions. The paper proposes a classification of developed economies and draws some conclusions regarding the usefulness of the concepts of complementarity and hierarchy of institutions for economic policy." (author's abstract

The political economy of neo-liberalism in Italy and France

There are many apparent similarities between the current political and economic situations of France and Italy. The mainstream view is that at least part of the neo-liberal strategy could be a solution to the economic problems of both variants of the European model of capitalism. However, the difficulties met by the implementation of these strategies by Sarkozy and Berlusconi lead to believe that the success or failure of neo-liberalisation has less to do with its (lack of) macroeconomic merits than with the stability of the socio-political alliances that support it. In this respect, France and Italy are markedly different. This paper shows that even if the "hard core" of the neoliberal social bloc is roughly the same in both countries, this core constitutes a minority of the electorate ; a neoliberal strategy must therefore rely on an extended social coalition, which might not be similar between countries. The Great Recession revealed part of the structural characteristics that set both countries apart. The aim of this article is to show that the consideration of the different socio-political alliances found in each country can help to understand how Italy and France ended up on different economic trajectories.Institutions, model of capitalism, neoliberal reforms, political crisis.

How does Party Fractionalization convey Preferences for Redistribution in Parliamentary Democracies ?

In this paper, we highlight the link between the political demand and social policy outcome while taking into account the design of the party system. The political demand is measured by indivudual preferences and the design of the party system is defined as the extent of party fractionalization. This is, to our knowledge, the first attempt in the literature to empirically link the political demand and the policy outcome with the help of a direct measure of preferences. Moreover, we account for an additional channel, so far neglected in the literature : The composition effect of the demand. Indeed, the heterogeneity of the demand within countries, more than the level of the demand itself, is shown to have a positive impact on welfare state generosity. This impact increases with the degree of fractionalization of the party system. We run regressions on a sample of 18 OECD countries over 23 years, carefully dealing with the issues raised by the use of time-series cross-section data.Political demand, party fractionalization, redistribution, time-series-cross-section data.

Institutions, unemployment and inactivity in the OECD countries

This paper provides new evidence on the linkages between a large array of institutional arrangements (on product, labour and financial markets) and employment performance. Our analysis includes unemployment, inactivity and jobless rates, thus allowing us to control for possible substitution effects across situations of non-employment and to check whether institutional rigidities affecting unemployment impact inactivity along the same line. To cope with common problems related to the inclusion of time-invariant institutional variables in fixed effects models, we present results of regressions based on three different estimators: PCSE, GLS and FEVD, the last one being a new procedure specifically designed to treat slowly changing variables. New institutional series are proposed, namely to account for unemployment insurance net replacement rates and employment protection legislation (EPL). Among other results, we find strong evidence of a positive effect of EPL on employment performance as well as of possible complementarities across product and labour markets regulation.unemployment ; inactivity ; institutions ; time-invariant variables

Institutional complementarity and diversity of social systems of innovation and production

According to the contemporary political economy literature on France, the country appears caught in the worst of all possible worlds: it fails to create the conditions for economic growth and employment by deregulating labour markets as the UK has done, and it lacks the institutional infrastructure that makes the German economy an export success. This paper, which analyses the adjustment of the French economy in the 1980s and into the 1990s, argues that this image of France is wrong. This literature misunderstands the relative position of French industry and misinterprets how firms managed to successfully make the transition from conventional mass production to flexible quality production. The particular French mode of coordination, revolving around the state-centered elite political-economic structure, was at the basis of this adjustment path. The paper analyses how this mode of coordination interacted with the crisis of the French production regime in the early 1980s, and with the changes in the ownership structures of large firms in response to that crisis. The resulting corporate governance structure increased the autonomy of top management from the state as well as capital markets, and led to a situation whereby far-reaching organisational changes in the large companies could be pursued. -- Der gegenwärtigen Fachliteratur zufolge befindet sich die französische Volkswirtschaft in einer äußerst problematischen Lage: Versuche, die Bedingungen für Wirtschaftswachstum und neue Arbeitsplätze durch Deregulierung nach britischem Vorbild zu schaffen, schlagen fehl. Die institutionelle Infrastruktur, auf welcher die deutsche Exportstärke beruht, ist aber ebensowenig gegeben. Das vorliegende Papier, in dem die Anpassung der französischen Wirtschaft in den achtziger und bis in die neunziger Jahre hinein analysiert wird, argumentiert, daß dieses Frankreichbild falsch ist. Es beruht auf einer Fehlinterpretation der Art und Weise, in der es Firmen gelungen ist, den Übergang von herkömmlicher Massenproduktion zu flexiblen, qualitätsorientierten Herstellungsverfahren zu schaffen. Die besondere französische Art der Koordination, die auf einer staatszentrierten, elitegeprägten wirtschaftspolitischen Struktur basiert, bildete die Grundlage dieses Anpassungspfades. Das Papier untersucht, welchen Einfluß diese Art der Koordination auf die Krise des französischen Produktionsregimes zu Beginn der achtziger Jahre sowie auf die daraus resultierenden Veränderungen in der Eigentumsstruktur großer Unternehmen hatte. Die Corporate Governance Struktur, die das Ergebnis dieses Prozesses war, erhöhte die Unabhängigkeit von Spitzenmanagern gegenüber Staat und Kapitalmärkten und schuf damit die Möglichkeit zu weitreichenden organisatorischen Veränderungen innerhalb der großen Unternehmen.