Varieties of Capitalism Essay -- Economics

Introduction Due to the rapid process of globalization, the issue of whether socio-economic institutions and policies are converging or diverging across different nations has become controversial. Various literatures on comparative institutional studies has been developed, in which the Varieties of Capitalism approach by Hall and Soskice (2001) is one of the most significant concepts that is being widely discussed. According to Hall and Thelen (2005), the ‘varieties of capitalism’ is a firm-centered approach where firm is placed as a key actor and is being considered relational. It emphasizes the concept of institutional complementarities, which ‘†¦one set of institutions is complementary to another when its presence raises the returns available from the other’ (Hall and Gingerich, 2004, p.6). Also, the development of relationships between firms and other five domains – industrial relations, vocational training and education, corporate governance, inter-firm relations as well as employees, is essential to ensure coordination to maintain competencies (Hall and Soskice, 2001). According to Knell and Srholec (2005), the varieties of capitalism literature has mainly distinguished and identified two types of coordination - Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs), in which competitive markets are dominant in LMES while CMEs are mainly based on strategic interaction. Using the UK as an example of LME and Germany as an example of CME, this essay will consider the ‘varieties of capitalism’ (VoC) implications for financial structures as well as labour relations of the respective economies. The definition of institutional complementarities will be outlined in the first paragraph, while the implications w... ...s: Coordinated and Uncoordinated Market Economies in the 1980s and 1990s’ In Kitschelt H, Lange P, Marks G, and Stephens J (eds) Continuity and Change in Contemporary Capitalism New York, Cambridge University Press Sternberg, R. and Kiese, M. and Stockinger, D. (2008) ‘Cluster policies in the US and Germany: varieties of capitalism perspective on two high-tech states’ Environment and Planning C: Government and Policy 2010, 28, pp.1063-1082 Streeck, W. (1992) Social Institutions and Economic Performance, Beverly Hills, Sage Publication Thelen, K. (2001) ‘Varieties of Labour Politics in the Developed Democracies’, in Hall, Peter A.; Soskice, David (eds.) Varieties of Capitalism: the Institutional Foundations of Comparative Advantage, pp. 71–103. New York: Oxford University Press Witt, M. A. (2010) ‘China: What Variety of Capitalism?’ working paper, INSEAD