Varieties of capitalism and East Asia: Long-term evolution, structural change, and the end of East Asian capitalism

Abstract

Literature on varieties of capitalism (VoC) argues that capitalist economies can be classified into several types, which include liberal and coordinated market economies. The present study revisits such an argument in light of the trend of increasing globalization and inequality, which may be a force toward the convergence of different varieties of capitalism. This study conducts cluster analysis to analyze the dynamic evolution of economies using the criteria of GDP growth rate, employment rate (employed/population), and top 10% income shares. The analysis first identifies four important types of capitalism: Anglo-Saxon (i.e., low growth and high inequality), Continental Europe (i.e., low growth, low inequality, and low employment), Nordic Europe (i.e., medium growth, low inequality, and high employment), and East Asia (i.e., high growth and low inequality). East Asian economies converged to either the Anglo-Saxon or European capitalism, which may be attributed to its short history. However, many European countries did not converge to Anglo-Saxon capitalism, which supports the VoC hypothesis on the stability of capitalism varieties.