International organizations and mainstream economists have consistently promoted the view that labour market rigidities are responsible for high unemployment, and that wide-ranging institutional deregulation is an appropriate policy response. Yet, as demonstrated by recent literature, the empirical support for the deregulatory view is ambiguous. This paper re-assesses this debate by bringing in new evidence from a larger group of countries, which includes advanced and new market economies. Using new data and paying special attention to the robustness of estimation results, we find rather thin support for the deregulatory view. The sensitivity analysis demonstrates that in most cases the adverse effects of institutions disappear with small changes in the sample or the use of alternative estimators and specifications. The impact of institutions is particularly weak in new market economies, where unemployment is related primarily to macroeconomic factors. Overall, our findings challenge the policy orthodoxy that comprehensive deregulation is the universal solution to unemployment.
We observe that industrial firms in Turkey have shifted substantial amounts of working capital from production activities to the purchase of high-yield interest-bearing assets, most notably public bonds, to ensure immediate short-term interest revenues. Introducing the new and historical institutional literatures to the financialisation research, this article empirically examines the influences of macroeconomic and institutional factors on non-financial firms' financialisation behaviour for the period 1990–2002. The findings from panel regression analyses using data from 41 firms listed on the Istanbul Stock Exchange indicate that both macroeconomic and institutional factors influence financialisation behaviour to different degrees. Turkish non-financial firms particularly engage in financialisation as a response to highly uncertain macroeconomic conditions. The findings indicate that the key characteristics of state-organised business system in Turkey, such as firms' ties with the government and family ownership, are not conducive to financialisation behaviour.
In interpreting futures markets, a well-established dichotomy of hedgers and speculators is at play. Hedgers are unwillingly exposed to risks; speculators take them over hoping for profit. This concept ignores the changing notions and practices of ‘speculation’ and especially ‘hedging’ since the nineteenth century. Originally, hedging meant that merchants ‘buy time’ in ongoing transactions. The concept later pointed to securing projected transactions by producers and processors. In today's risk economy, the term can label at best the intent to decrease exposure to a specific market risk, as part of a constant process of readjusting principally ‘speculative’ market positions by all market participants. Futures markets ultimately increased the average exposure to risk, but they also made the exposure potentially manageable; this entails that the economic process is increasingly developed by expressing expectations about the future through taking market positions, that is, by creating risk.
In an era of outsourcing and cross-border production networks, scholars have argued that production strategies based on tacit knoweldge can be key for retaining business, and jobs, in particular locations. However, the same properties that theoretically provide tacit-heavy production regions with an advantage against new, low-wage producers are a disadvantage to firms trying to capitalize on non-local technology and the opportunities of disaggregated production. This article examines the tacit-rich textile and clothing industries in Italy, and argues that firms' concentrations of tacit knowledge did, for some time, lead to retention of market share and jobs. Globalization strategies, including direct ownership of facilities abroad and vertical integration at home, aimed to maintain flexibility in the production chain by compensating for the difficulty of sharing tacit knowledge across borders, and by containing tacit knowledge in contracting home districts. However, instead of reinforcing traditional strengths of the Italian system, these new strategies may pose a challenge to tacit-intense production and innovation.
This paper examines how diversely organized capitalist societies evolve by analyzing the transformation of Japan's financial system since the 1990s. The banking, securities and insurance, as well as the postal financial institutions changed significantly, but are hardly converging to Anglo-American or ‘liberal market’ models. We contend that Japan's new financial system is best characterized as syncretic, with new, traditional and hybrid forms of practices, organizations and norms coexisting. Syncretism in industry was driven by a distinctive pattern of interest group politics we call syncretization. Strong political leadership, facing serious electoral threats, shifted the policy logic from gradual incremental reforms following traditional interest group dynamics, to rapid reforms that excluded the traditionally powerful interest groups most affected by these reforms. We support the notion that diverse industry outcomes can be complementary to broader political economic reforms that take Japan away from its traditional model, part of a broader ‘convergence towards diversity’.
Emerging countries (ECs), and notably Asian ones, are challenging Northern countries in the technological field. Using an application of the Social System of Innovation and Production (SSIP) framework, we carry out a two-step analysis to compare the socio-economic models of technological upgrading of 27 ECs in 2005. Searching for a typical Asian model, we observe that the eight Asian ECs in our panel are dispersed among four of the five types of emerging capitalism. Although Asian ECs belong mainly to the directed model, three exceptions are observed: South Korea has a de-centralized model, Malaysia a finance-led model and the Philippines a cocktail model. This diversity of institutional architectures in Asian ECs does not prove that there is no Asian mode of upgrading but rather that an Asian path towards technological emergence does exist, followed by Asian ECs at different periods and at varying speeds.
We present an institutional comparison of 13 major Asian business systems—China, Hong Kong, India, Indonesia, Japan, Laos, Malaysia, the Philippines, Singapore, Korea, Taiwan, Thailand and Vietnam—with one another and five major Western economies—France, Germany, Sweden, the UK and the USA. We find five major types of business systems in Asia: (post-)socialist, advanced city, emerging Southeast Asian, advanced Northeast Asian and Japanese. With the exception of Japan, all Asian forms of capitalism are fundamentally distinct from Western types of capitalism. We conclude that the Varieties of Capitalism (VOC) dichotomy is not applicable to Asia; that none of the existing major frameworks capture all Asian types of capitalism; and that Asian business systems (except Japan) cannot be understood through categories identified in the West. Our analysis further suggests a need for the field to invest in further research on social capital, culture, informality and multiplexity.
Modern theories of rational decision-making distinguish between certainty, risk and uncertainty. When the consequences of action cannot be calculated, decision-makers confront uncertainty rather than risk. This paper examines how, as a practical accomplishment, uncertain decisions are shifted in the direction of risk, focusing on the history of credit ratings. Decision-making about credit is fraught with uncertainties, and credit rating was invented in the nineteenth century in the USA to help make those uncertainties more tractable. Credit rating methods spread widely, even before their accuracy or efficacy had been demonstrated. The origins of credit rating reveal problems and limits that re-emerged during the financial crisis of 2008, when rating agencies performed very poorly.
This article first provides a game-theoretic, endogenous view of institutions and then applies the idea to identify the sources of institutional trajectories of economies development in China, Japan, and Korea. It stylises the Malthusian phase of the East Asian economies as a peasant-based economies in which small conjugal families self-managed their working times between farming on small plots—leased or owned—and handcrafting for personal consumption and markets. It then compares institutional arrangements across these economies that sustained otherwise similar economies. It characterises the varied nature of the political states of Qing China, Tokugawa Japan and Yi Korea by focusing on the way agricultural taxes were enforced. It also identifies different patterns of social norms of trust that were institutional complements to, or substitutes for, the political states. Finally, it traces the path-dependent transformations of these state-norm combinations along subsequent transitions to post-Malthusian phases of economic growth in the respective economies.
The dominant institutions of economic governance vary considerably between countries in both Northeast and Southeast Asia, generating four nationally distinct varieties of political–economic organization in terms of varying state direction of the economy and degree of business co-ordination of economic activities: co-governed, state-led, networked and personalized. In the 1980s, Malaysia and Taiwan represented more the state-led variety of capitalist development, while Japan and Thailand shared many characteristics of the networked form. In the 1990s and 2000s, these four political economies began to change, but to different degrees and in different directions. In particular, Taiwan became more similar to the co-governed variety of capitalism, while the degree of business co-ordination declined significantly in Thailand so that its political economy became more personalized. These contrasting kinds of changes in the four economies can best be explained by shifts in the interest and power configurations of dominant coalitions.
Confidence is an understudied topic in modern economics as well as in modern sociology, but vital to an understanding of financial markets and financial crises. In this article, I suggest what a theory of confidence may look like that is centered around signs. With the help of this theoretical approach, to which I add some ideas by Walter Bagehot, I explore the financial crisis of 2008–2009 in the USA, how confidence was lost during the fall of 2008 in connection with the bankruptcy of Lehman Brothers, and especially how it was then restored in the spring of 2009. I conclude that the processes of loosing and restoring confidence differ.
In this paper, I put the ongoing G20 process of improving the regulation of international finance into a historically and theoretically informed perspective. To understand the driving forces behind and obstacles to international cooperation in governing finance I combine concepts from international and comparative political economy. Different variants of capitalism have reacted in distinct ways to the collapse of the Bretton Woods System in the 1970s. Countries like the USA and the UK followed a path of financialization while Germany and countries in East Asia have pursued an export-oriented growth model. The interdependence between two variants of capitalism has contributed to the dynamics and crises of international finance for the past four decades. This ‘imbalance of capitalisms’ also became an obstacle to international cooperation in regulating finance, because both variants have different preferences for international cooperation in the fields of macroeconomic policies, currency policies, as well as the regulation of financial flows and financial firms.
Using a large annual database of French firms (1994–2000), this article examines the determinants of workforce reductions in publicly listed and non-listed companies and their consequences on firm performance. First, workforce reduction appears to be a defensive response to adverse economic shocks. However, publicly listed firms anticipate better than do unlisted companies the decision to cut jobs. Second, a difference-in-differences model indicates that there has been a very small but significant improvement in the major performance indicators for the non-listed companies. For listed companies, the corresponding estimates are not significant.
The article analyses patterns of atypical work and their dynamics of change in three service sectors (retailing, hotels and hospitals) in Germany and France. This sectoral approach reveals that the growth of atypical employment is not just a result of new exit options that allow employers to bypass national employment standards. To a significant extent, it is also the delayed effect of latent structures, in particular the weakness of industrial relations as well as pre-existing legal exit options and gaps in the regulation of working conditions. With increasing price competition, these latent structures have come more strongly to the fore as employers make use of their significant ability to unilaterally withdraw from an existing framework. In these service sectors, the process of dualization cannot be analysed as a mere consequence of deregulation policies nor as a result of the weakening of the generalization effect emanating from manufacturing industry.
Over the last four decades, the dynamics of innovation in the US economy have shifted. Whereas the development of new technologies was once dominated by large, vertically integrated firms, since the 1980s an increasingly ‘networked’ innovation environment has emerged in which small firms play a central role. But why did this shift emerge? Extant research emphasizes changes in the decision-making calculus of large firms, the rise of private venture capital, legal changes and a variety of subnational development initiatives. In this paper, we demonstrate the critical importance of government innovation programs. We argue that a single small, relatively unknown program—the Small Business Innovation Research (SBIR) program—played a critical role in catalyzing this broader economic transformation. Drawing on programmatic data, employment trends and data on SBIR's intersection with venture capital and federal procurement, we show how SBIR catalyzed a series of cross-cutting institutional mechanisms that supported the growth of small, innovative technology firms. We propose the term ‘social resonance’ to suggest how even small government programs can play an important role in altering large-scale institutional dynamics.
Although illegal markets have considerable economic significance and are of theoretical importance, they have been largely ignored by economic sociology. In the first part of this article, we propose a categorization for illegal markets. In the second part, the structural characteristics of illegal markets are described along the three coordination problems of valuation, competition and cooperation. By conceptualizing the structure of illegal markets based on general coordination problems, which are also cornerstones in the study of legal markets, we can locate the systematic differences in the functioning of markets that operate illegally. The article concludes by appealing to economic sociology to strengthen research on illegal markets and suggesting areas for future empirical research.
This article uses the moralized markets and markets as politics literatures in economic sociology to explore the emerging industry of private consultants who produce ‘democratic’ dialogues for organizational clients from all sectors. In multi-method field research, we (a) trace moralized processes by which market activity and political process are distinguished in an era of financial crisis, and (b) argue that the ability to produce authentic civic-ness is valuable specifically because distinctions between business, government and civil society have become less meaningful in contemporary neoliberal governance. Engagement consultants construct social and economic profits as interdependent and mutually reinforcing, while claiming protection from both business as usual and ordinary politics—a ‘positive’ outcome useful for budget-slashing and benefit-cutting at a moment when authorities face a loss of public faith. Such findings contribute to a better understanding of the historical resiliency of neoliberalism and reveal the meaning-centered dynamics of politicization in moralized markets.