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.
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