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The Paradox of Liberalization — Understanding Dualism and the Recovery of the German Political Economy


  • Anke Hassel


What do the recent trends in German economic development convey about the trajectory of change? Has liberalization prepared the German economy to deal with new challenges? What effects will liberalization have on the co-ordinating capacities of economic institutions? This article argues that co-ordination and liberalization are two sides of the same coin in the process of corporate restructuring in the face of economic shocks. Firms seek labour co-operation in the face of tighter competitive pressures and exploit institutional advantages of co-ordination. However, tighter co-operation with core workers sharpened insider–outsider divisions and were built upon service sector cost cutting through liberalization. The combination of plant-level restructuring and social policy change forms a trajectory of institutional adjustment of forming complementary economic segments which work under different rules. The process is driven by producer coalitions of export-oriented firms and core workers’ representatives, rather than by firms per se.

Suggested Citation

  • Anke Hassel, 2014. "The Paradox of Liberalization — Understanding Dualism and the Recovery of the German Political Economy," British Journal of Industrial Relations, London School of Economics, vol. 52(1), pages 57-81, March.
  • Handle: RePEc:bla:brjirl:v:52:y:2014:i:1:p:57-81

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    References listed on IDEAS

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    Cited by:

    1. Marsden, David, 2015. "The future of the German industrial relations model," LSE Research Online Documents on Economics 62932, London School of Economics and Political Science, LSE Library.
    2. Konstantinos Chisiridis & Kostas Mouratidis & Theodore Panagiotidis, 2018. "The North-South Divide, the Euro and the World," Working Papers 377, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    3. Chiara Benassi, 2016. "Liberalization Only at the Margins? Analysing the Growth of Temporary Work in German Core Manufacturing Sectors," British Journal of Industrial Relations, London School of Economics, vol. 54(3), pages 597-622, September.
    4. Kinderman, Daniel, 2014. "Challenging varieties of capitalism's account of business interests: The new social market initiative and German employers' quest for liberalization, 2000-2014," MPIfG Discussion Paper 14/16, Max Planck Institute for the Study of Societies.
    5. Werner Eichhorst & Michael J. Kendzia, 2016. "Workforce segmentation in Germany: from the founding era to the present time
      [Die Segmentierung der Belegschaft in Deutschland: von der Gründerzeit bis heute]
      ," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(4), pages 297-315, December.
    6. Eichhorst, Werner & Marx, Paul, 2019. "How Stable Is Labour Market Dualism? Reforms of Employment Protection in Nine European Countries," IZA Discussion Papers 12309, Institute of Labor Economics (IZA).
    7. David Weisstanner, 2017. "Dualization and inequality revisited: Temporary employment regulation and middle-class incomes," LIS Working papers 720, LIS Cross-National Data Center in Luxembourg.
    8. Marco de Pinto & Jochen Michaelis, 2014. "The labor market effects of trade unions Layard meets Melitz," MAGKS Papers on Economics 201418, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Economides, George & Moutos, Thomas, 2017. "Minimum wages in the presence of in-kind redistribution," CEPIE Working Papers 08/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    10. David Marsden, 2015. "The Future of the German Industrial Relations Model," CEP Discussion Papers dp1344, Centre for Economic Performance, LSE.
    11. John Addison & Paulino Teixeira & Jens Stephani & Lutz Bellmann, 2015. "Declining Unions and the Coverage Wage Gap: Can German Unions Still Cut It?," Journal of Labor Research, Springer, vol. 36(3), pages 301-317, September.
    12. Bispinck, Reinhard & Schulten, Thorsten, 2014. "Wages, collective bargaining and economic development in Germany: Towards a more expansive and solidaristic development?," WSI Working Papers 191, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
    13. Marco Pinto & Jochen Michaelis, 2016. "The labor market effects of trade unions in an open economy: Layard meets Melitz," International Economics and Economic Policy, Springer, vol. 13(2), pages 223-232, April.
    14. Baccaro, Lucio & Pontusson, Jonas, 2018. "Comparative political economy and varieties of macroeconomics," MPIfG Discussion Paper 18/10, Max Planck Institute for the Study of Societies.
    15. Aidan Regan & Samuel Brazys, 2017. "Celtic phoenix or leprechaun economics? The politics of an FDI led growth model in Europe," Working Papers 201701, Geary Institute, University College Dublin.
    16. Gerber, Christine, 2014. "Trade union responses towards labour market dualization comparing the impact of the varieties of industrial relations in Germany, Slovenia and Poland," PIPE - Papers on International Political Economy 23/2014, Free University Berlin, Center for International Political Economy.
    17. Dingeldey, Irene & Kathmann, Till, 2017. "Einführung und Wirkmächtigkeit des gesetzlichen Mindestlohns in Deutschland: Institutionelle Reformen und gewerkschaftliche Strategien in einem segmentierten Tarifsystem," Schriftenreihe Institut Arbeit und Wirtschaft 21/2017, Institut Arbeit und Wirtschaft (IAW), Universität Bremen und Arbeitnehmerkammer Bremen.
    18. Ji-Whan Yun, 2016. "The Setback in Political Entrepreneurship and Employment Dualization in Japan, 1998–2012," British Journal of Industrial Relations, London School of Economics, vol. 54(3), pages 473-495, September.
    19. John T. Addison & Paulino Teixeira & Katalin Evers & Lutz Bellmann, 2016. "Is the Erosion Thesis Overblown? Alignment from Without in Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(3), pages 415-443, July.
    20. Andreas Kornelakis, 2016. "Inclusion or Dualization? The Political Economy of Employment Relations in Italian and Greek Telecommunications," British Journal of Industrial Relations, London School of Economics, vol. 54(2), pages 385-408, June.
    21. repec:bla:brjirl:v:56:y:2018:i:3:p:579-602 is not listed on IDEAS
    22. Hiroaki Richard Watanabe, 2015. "Neoliberal reform for greater competitiveness: labour market deregulation in Japan and Italy," Industrial Relations Journal, Wiley Blackwell, vol. 46(1), pages 54-76, January.

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