The Politics of Growth Revisited

Abstract

The purpose of this article is to examine the impact of labor market institutions and partisan politics on macroeconomic performance in advanced industrial societies since the mid-1970s. I do this by reevaluating some of the main claims of an influential comparative political economy literature of growth in light of some recent lessons from conceptual and empirical work associated with new growth theory. I also update the earlier "left-labor" models in light of several competing institutional explanations for different macroeconomic performance in advanced democracies. My findings are mixed. The evidence does suggest that congruent labor and political regimes have higher rates of growth than incongruent regimes (i.e., strong, organized unions with mostly conservative government or weak unions with mostly social democratic government). This appears to be true even in recent years and even after accounting for both cross-national income convergence and variations in political institutions and in firm-level coordinating capacity. Moreover, there is evidence that as proponents of social democratic corporatism suggest, countries with dominant left (right) governments and encompassing (weak) labor movements deliver higher investment and employment than do mixed regimes. However, in contrast to earlier work, I find that the more market-oriented version of contemporary capitalism is associated with higher absolute per capita growth rates. This discrepancy in relative performance has increased considerably since the mid-1980s.