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This article revisits the macroeconomic foundations and political economy of national growth models. It argues that the neo-Kaleckian model, which inspired the emergent growth model perspective and focuses primarily on the functional income distribution, can be usefully complemented by theories of private household consumption that focus on the per...
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Context 1
... of top household income shares but relatively little variation in the wage share ( Fig. 1)? And second, how are these trends in income distribution related to the emergence of current account surpluses and deficits, which have been driven primarily by the corporate sector in Germany and by the private household sector in the United States (Fig. ...
Context 2
... highlighted in the discussion of the sectoral balances approach, above, the government may also affect macroeconomic outcomes in a more direct way, that is, through the government financial balance (see also Fig. 2). Torben Iversen and David Soskice cite a number of studies suggesting that higher wage centralization is associated with more conservative monetary and fiscal policy. 57 The basic argument is that with high union centralization, each union is large enough to know that a high wage settlement will push up inflation. This in turn provides ...
Citations
... More specifically, it offered a perspective on the uneven relationship between the countries in the centre and the periphery of the Eurozone. The VoC approach also integrates debt and financial stress into the dynamics between growth models before the crisis (Iversen and Soskice 2013;Johnston et al. 2013;Behringer and Van Treeck 2019) and draw a link to the spiral of 'over-exuberant' borrowing of LME and MME countries (Soskice 2009;Hall 2014). In the case of the Eurozone, however, instead of focusing on the new patterns of accumulation and the rise of debt (as the PK literature), the severity of the crisis in the 'South' is mostly explained as a result of the impossibility of depreciating the national currency due to the consolidation of the monetary union (Johnston et al. 2013;Höpner and Lutter 2014;Johnston and Regan 2016;Hall 2018). ...
... In Iversen and Soskice (2012) and Johnston and Regan (2016), inter alia, political support for firms' mercantilist strategy depends, to a large extent, on the coalitions in power. On the other hand, also from the VoC, the possibility that households resort to debt in response to pressure on wages and rising inequality rests on different hypotheses, such as the type of regulation, the configuration of the Welfare State, workers' prospects (Carlin and Soskice 2009;Iversen and Soskice 2012;Behringer and Van Treeck 2019). ...
This article evaluates the potential of the Post-Keynesian literature on growth models to gain influence over the Varieties of Capitalism approach within Comparative Political Economy. It shows that the future analytical strength of the latter approach depends, primarily, on the ability to consolidate macroeconomic principles consistent with a dynamic reality. On the other hand, Post-Keynesian macroeconomic foundations allow financialised growth models to capture the importance of power struggles in long-term growth as well as to integrate crises as recurrent and inherent phenomena to capitalist economies. That said, Post-Keynesian challenge to become a beacon within CPE lies on moving beyond country-based analyses towards the construction of a systematic association between, on the one hand, the institutional aspects shared between countries and, on the other hand, their classification on growth models.
... The past few years have seen a surge of interest in "growth models" among comparative and international political economists and post-Keynesian economists (Baccaro and Pontusson 2016;Behringer and van Treeck 2019;Hassel and Palier 2021). This rapprochement of social scientists and heterodox economists promises to revitalize "political economy" as an interdisciplinary field of study (Stockhammer and Kohler 2022). ...
... The empirical research on growth models is rapidly expanding and now covers a growing number of topics: cross-country variation in growth trajectories (Baccaro and Pontusson 2016;Bohle and Regan 2021;Johnston and Regan 2018); changes in growth trajectories over time (Erixon and Pontusson 2022;Höpner 2019;Reisenbichler and Wiedemann 2022); variation in policy stance across countries (e.g., fiscal policy, tax policy) as a result of growth model differences (Haffert and Mertens 2021;Hopkin 2020;; the impact of growth models on individual preferences (Baccaro and Neimanns 2022;; the effects of cross-country institutional differences on patterns of inequality and growth (Behringer and van Treeck 2019); the impact of particular sectors on growth (Bürgisser and Di Carlo 2022); and the relationship between growth models and central bank policies (Reisenbichler 2020). ...
We introduce a novel approach to operationalizing growth models. Drawing on the most recent release of OECD Input–Output Tables, we compute the import-adjusted growth contributions of consumption, investment, government expenditures, and exports for sixty-six countries in the years 1995–2007 and 2009–2018, covering not only advanced Western economies but also Central and Eastern European, South-East Asian, and Latin American countries. We find that most are export-led or domestic demand-led and other forms of growth are rare. Our results differ from other classifications in that they reveal important geographical variation as well as temporal change. In a subsequent step, we illustrate the utility of the methodology by investigating the link between real exchange rate devaluation and export-led growth, a contentious issue in the existing literature. For pre-crisis advanced Western economies, we find an association between the two variables, which is statistically significant only when our new indicator is used.
... Across the advanced OECD countries, the capacity of wages to contribute to economic growth has come under pressure, with economically liberalizing reforms contributing to the emergence of alternative, post-Fordist growth models relying on exports or debt-induced privatized Keynesianism (Baccaro and Pontusson 2016;Stockhammer 2015). Irrespective of the concrete character of the alternative growth models, absolute growth performance has often been meager and distributive outcomes unfavorable for individuals in the lower income segments (Behringer and van Treeck 2019;Mian, Straub, and Sufi 2021;Summers 2015). Our results in this paper suggest that changing media systems in the form of declining levels of political parallelism and increasing ownership concentration may contribute to media bias being tilted towards economically right-leaning positions. ...
A sizable literature on media bias suggests that media coverage is frequently biased towards certain political and economic positions. However, we know little about what drives variation in political and ideological bias in news coverage across countries. In this paper, we argue that increasingly commercialized and concentrated media markets are likely to be associated with media coverage leaning more favorably towards economically more right-wing positions. Media bias should reflect the preferences of media owners and should be a result of a reduced diversity of news media content. In contrast, where media outlets continue to be oriented more closely along partisan lines, often referred to as political parallel-ism, bias on economic issues should be more likely to cancel out at the aggregate level. To test these claims, we combine expert survey data on partisan attachments of media outlets, party ideologies, and media ownership concentration for twenty-four European countries. Results from multilevel regression models support our theoretical expectations. With media framing potentially affecting individual-level preferences and perceptions, high and rising levels of media ownership concentration may help to explain why governments in the affluent Western democracies often do remarkably little to counter trends of rising income inequality.
... Second, we expand on Braun and Deeg's (2020) call for making the financial sector more central to the study of growth regimes by providing a broadbased analytical framework (cf. Behringer and Treeck 2019;Jones 2021). Lastly, we propose that the current focus on the long-term coherence of growth models should incorporate more directly short-term shifts and adaptation to internal and external challenges. ...
... Notwithstanding these important findings, recent contributions have diverged from a focus on the distribution of income between wages and profits (Baccaro and Benassi 2017;Baccaro and Pontusson 2018) and studied the financial flows between institutional sectors that occur in different growth models (Behringer and Treeck 2019;Braun and Deeg 2020). From this perspective, a particular growth model is not simply defined by the source of aggregate demand, but also by the question which institutional sectors build up financial assets or incur liabilities. ...
Growth model theory has turned the focus of comparative political economy scholars on the demand drivers of economic growth. But while its proponents emphasize the variety and inherent instability of growth models, research so far has been more concerned with the emergence and coherence of stable growth models than in the process of change. We argue that growth model change can be understood as a process of financial rebalancing on the level of institutional sectors. When an overindebted sector is forced to deleverage, a politically contested process emerges over the path of adjustment. We derive various ways in which each sector can contribute to this process of financial adjustment, which we conceptualize as the activation of macroeconomic ‘compensation valves’. This process shapes the trajectory of economic performance during financial crisis and determines whether a new feasible growth model can emerge in its aftermath. We apply our analytical lens in a comparative case study of Germany and the Netherlands during the Great Recession. We conclude that future research on growth models should more explicitly problematize the ability of political economies to adapt to financial instability.
... Given the apparently unambiguous results from more micro-level studies, it seems surprising that this view has not manifested itself in a consensus on the macro-level association of inequality and (private) savings. While Koo and Song (2016) report that aggregate saving rates increase with income inequality due to the rich saving more, Klein (2015), Perugini et al. (2016), , Behringer and van Treeck (2019) and Petach and Tavani (2021) find evidence for a negative relationship between savings and inequality, in line with the expenditure cascades hypothesis. Most studies fail to find a significant effect in either direction, though (Bordo and Meissner, 2012;Cuaresma et al., 2018;Gu and Huang, 2014;Gu et al., 2015;Leigh and Posso, 2009;Schmidt-Hebbel and Serven, 2000;Wildauer and Stockhammer, 2018). ...
... In particular, we explicate the potential micro origins of the institutional channel that and Ascione and Schnetzer (2021) find to be of crucial relevance to explain the empirical cross-country heterogeneity and time variation: In addition to the ease of access to credit or consumerist social norms, also the social network of everyday interactions might be an important determinant for relative importance of expenditure cascades. The growing literature on 'growth models' within comparative political economy might thus also benefit from considering institutional differences in social segregation (Behringer and van Treeck, 2019). Moreover, our results point to a relevant trade-off for policy-makers: According to our model results, policies aimed at reducing occupational or residential segregation might also increase conspicuous consumption that might be environmentally wasteful (Howarth, 1996) and contributes to the destabilising build-up of private debt (Van Treeck, 2014). ...
The nexus between debt and inequality has attracted considerable scholarly attention in the wake of the global financial crisis. One prominent candidate to explain the striking co-evolution of income inequality and private debt in this period has been the theory of upward-looking consumption externalities leading to expenditure cascades. We propose a parsimonious model of upward-looking consumption at the micro level mediated by perception networks with empirically plausible topologies. This allows us to make sense of the ambiguous empirical literature on the relevance of this channel. Up to our knowledge, our approach is the first to make the reference group to which conspicuous consumption relates explicit. Our model, based purely on current income, replicates the major stylised facts regarding micro consumption behaviour and is thus observationally equivalent to the workhorse permanent income hypothesis, without facing its dual problem of `excess smoothness' and `excess sensitivity'. We also demonstrate that the network topology and segregation has a significant effect on consumption patterns which has so far been neglected.
... Differences in trade performance and trade policy feature prominently in public discourse as well as in discussions on the development of different growth models in Europe. The literature argues that while most European countries experienced a decrease in domestic demand due to increasing inequality from the 1980s onwards (e.g., Stockhammer, 2015;Behringer & van Treeck, 2019), those with a competitive export sector were able to counteract this trend through an increase in exports, thereby following an export-led growth model (e.g., Gräbner et al., 2020a). Countries lacking the international competitiveness that is necessary to follow such as export-led growth model accumulated high levels of private (and, in a few cases, public) debt to stabilise aggregate demand -a strategy that proved unsustainable once the financial and economic crisis started (Gräbner et al., 2020b). ...
... In the literature on growth models, typologies are a well-established instrument for analysing commonalities and differences across countries (e.g., Simonazzi et al., 2013;Gräbner et al., 2020a;Behringer & van Treeck, 2019). These typologies group countries according to some fundamental similarities and can go beyond simple classifications by capturing systemic aspects of policy or institutional arrangements. ...
By studying the factors underlying differences in trade performance across
European economies, this paper derives six different “trade models” for 22
EU countries and explores their developmental and distributional dynamics.
We first introduce a typology of trade models by clustering countries on the
basis of four key dimensions of trade performance: endowments, technological
specialisation, labour market characteristics and regulatory requirements.
The resulting clusters comprise countries that base their export success on
similar trade models. Our results indicate the existence of six different
trade models: the ‘primary goods model’ (Latvia, Estonia), the ‘finance
model’ (Luxembourg), the ‘flexible labour market model’ (UK), the ‘periphery
model’ (Greece, Portugal, Spain, Italy, France), the ‘industrial workbench
model’ (Slovenia, Slovakia, Poland, Hungary, the Czech Republic), and the
‘hightech model’ (Sweden, Denmark, Netherlands, Belgium, Ireland, Finland,
Germany and Austria). Subsequently, we provide a comparative analysis of the
economic development and trends in inequality across these trade models.
Inter alia, we observe a shrinking wage share and increasing personal income
inequality in most of them, yet find that the ‘high-tech model’ is an
exceptional case, being characterised by relatively stable economic
development and an institutional setting that managed to counteract rising
inequality.
... However, the fact that this shift also coincided with increased income inequality meant that the proceeds of growth once more accrued to individuals with a lower marginal propensity to consume, undermining wage-led growth. Both cases highlight the importance not just of the distribution of national income between capital and labour, but also the distribution of national income within capital and labour shares (Behringer and van Treeck, 2019;Clift and McDaniel, 2021). The article concludes by highlighting some of the broader implications of this analysis, both for academic political economy, and for the practice of economic policy in developed democracies today. ...
Theories of ‘growth models’ explain capitalist diversity by reference to shifting drivers of aggregate demand in different national economies. This article expands the growth models framework beyond its conventional focus on debt-driven and export-driven demand, through an ideational analysis of Thatcher’s vision of a property-owning democracy, and Blair’s knowledge-driven growth agenda. Drawing on policymakers’ statements, it shows how these hypothetical growth models differed from the debt-driven growth model that ultimately prevailed. Using data on the distribution of wealth and wages, it highlights how both approaches failed to generate sustainable demand; in Thatcher’s case, because of an insufficiently broad distribution of capital ownership, in Blair’s case, because of an insufficiently broad distribution of lucrative knowledge work. This indicates that explanations of dysfunctional growth models need to consider not just the split of national income between labour and capital, but also the distribution of both labour income and capital income between households.
... A limitation of our analysis is that econometric panel analyses might cover changes in country-specific institutional arrangements over time (Behringer and Van Treeck, 2019). Further research with regard to altering growth regimes and different varieties of capitalism might reveal additional insights on the relationship between household debt, income inequality, and the current account in single countries. ...
Rising current account imbalances around the globe preceded the Great Recession in the late 2000s. These imbalances narrowed significantly during the crisis mainly due to a negative demand shock and plummeting imports in deficit countries. While income inequality and household debt played a pivotal role in current account imbalances prior to the crisis, it is unclear whether these relations still hold when including the post-crisis era. We estimate current account determinants using a panel of 31 OECD countries over 45 years and include measures for functional and personal income distribution as well as household debt. We find a sustained relation between income inequality and current accounts when including the post-crisis period, while the link to household debt diminishes, indicating a change in the debt regime in a number of countries.
... Finally, how does GMP literature neglect how growth is distributed? Analysing the politics of productivity is vital not just because of its effects on comparative institutional advantage (à la VoC), but because it directly shapes patterns of economic growth and distribution (see Behringer and van Treeck, 2019;Hein et al., 2020;Hope and Soskice, 2016: 218-219). Our analysis highlights how demand-and supply-sides interact, with adverse distributional outcomes associated with Britain's highly fragmented service-sector labour market, marked by a very large financial sector, resulting from successive governments' policy decisions. ...
This article assesses the usefulness of the growth models perspective for understanding contemporary British capitalism in the context of its ongoing ‘productivity puzzle’ and stagnating economic growth. The analysis of British capitalism supports our argument that growth models perspective analyses currently have limited capacity to understand the developmental trajectory of growth models, the instabilities and dysfunctionalities of these models, and how growth comes to be distributed differently across models. Through analysis of capital investment patterns and labour market characteristics, it reveals the importance of the ‘politics of productivity’, embedded in state institutions, which shapes the nature and distribution of economic growth. The article outlines a new framework for growth models analysis that ‘brings the supply-side back in’ for a more holistic approach to the political economy of capitalist growth (and non-growth). It argues this is critical for understanding patterns of political economic development in the British model of capitalism and beyond.
... They include wage flexibility, the weakening of collective bargaining, and less employment protection legislation (Lavoie & Stockhammer, 2013). For profit-led regimes, a rise in the wage share has a negative total effect on aggregate demand when investment spending is extremely sensitive to firms' profit margins or exports are highly price-sensitive (Behringer & Van Treeck, 2019). ...
... By examining the GDP components in the different periods between 1950 and 2019 (Table 2), the major difference is the share of gross capital formation or the investment rate. Rather than consumption-led demand, the weak link lies in the corporate and the government demands (Behringer & Van Treeck, 2019). The mean differences between the ISI period (1961)(1962)(1963)(1964)(1965)(1966)(1967)(1968)(1969)(1970)(1971)(1972)(1973)(1974)(1975)(1976)(1977)(1978)(1979)(1980) and the subsequent periods are significant in comparison to the crisis of the ISI and the subsequent period of liberalization. ...
How can we explain that some emerging economies grow faster than others? What explains the sustainability of their growth? Not all types of capitalism in emerging markets contribute equally to sustainable growth rates that undergird development. Comparative capitalism research on European economies temporary growth models aims to more properly grasp change in the varieties of capitalism approach. Adoption of the growth models in emerging markets capitalism research requires attention to integration into the global economy and to political coalitions, and the need to deal with the methodological challenges, given high labor market informality and political instability. This article seeks to make sense of changes in the components of successive growth models throughout a path-dependent capitalist variety, expand the growth model analytical framework by testing elements alongside demand (and supply) based on a case study of Brazil, and explore coalitions in economic reform to identify growth model’s social blocs. The article’s results unveil challenges to the employment of existing concepts and analytical framework; the need to build bridges between growth models and the political economy of development; and an exploratory assessment of growth model contributions to Brazil's postwar development. Thereof, in the long term, interest shifts of economic elites between liberal and non-liberal economic regimes suggest a fragility of repeated attempts to form a durable developmental coalition, a process dynamic that frays state-permeated capitalism positive externalities. It concludes that both path dependent developmental institutions, which hinder change, and growth instability limit the possibilities of designing institutional reforms out of the middle-income trap.
