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Varieties of capitalism and growth regimes

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  • Jan Behringer
  • Till van Treeck

Abstract

This article brings together the varieties of capitalism and the growth model approaches to comparative political economy to analyze the macroeconomic implications of changes in income distribution. In the decades before the financial crisis, coordinated market economies (CMEs) and liberal market economies (LMEs) developed different but unsustainable growth models which resulted in global current account imbalances. We analyze the relative importance of wage coordination and income distribution in explaining the emergence of global imbalances. We argue that strongly rising top income shares contributed to the decline in household saving and current account balances in major LMEs, whereas pronounced falls in the wage share contributed to the weakness of domestic demand and rising current account balances in CMEs. Wage coordination affected current account balances both directly and, more importantly, indirectly through its effects on income distribution. We test the argument for a sample of 18 industrialized countries over the period 1981-2007.

Suggested Citation

  • Jan Behringer & Till van Treeck, 2017. "Varieties of capitalism and growth regimes," FMM Working Paper 09-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:fmmpap:09-2017
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    3. van Treeck, Till. & Sturn, Simon., 2012. "Income inequality as a cause of the Great Recession? : A survey of current debates," ILO Working Papers 994709343402676, International Labour Organization.
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    13. Hamzeh Arabzadeh, 2016. "The political economy of twin deficits and wage setting centralization," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2016017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    Cited by:

    1. Mark Setterfield & Yun K. Kim, 2018. "Varieties of Capitalism, Increasing Income Inequality, and the Sustainability of Long-Run Growth," Working Papers 1806, New School for Social Research, Department of Economics.

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