Investing in the knowledge economy: The comparative political economy of public investments in knowledge‐based capital

Abstract

AbstractInvestments in education and retraining, or research and development have become essential in today's knowledge‐intensive economies. While private actors often underprovided such knowledge‐based capital due to various market failures, there is also considerable variation in the extent to which governments invest in knowledge‐based capital due to cross‐sectional and intertemporal trade‐offs. I argue that in trying to account for this variation, corporatist institutions are a neglected but crucial factor. By necessitating and facilitating cooperation and compensation, corporatism creates a more collaborative style of policy making and a sense of common ownership of policy problems that helps overcome the trade‐offs associated with investments in knowledge‐based capital. Using within‐between mixed‐effects models on a novel time‐series‐cross‐sectional dataset, I find strong support for this argument. Corporatist countries invest a lot more in knowledge‐based capital, and corporatism also affects how countries react to deindustrialization. This is an important finding given the key role of long‐term policy making in areas like climate change politics, pandemic preparedness or responding to the digital transformation.