Crisis and complementarities: a comparative political economy of economic policies after COVID-19

Bob Hancké, Toon Van Overbeke and Dustin Voss

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We examine economic policy responses to the COVID-19 induced economic collapse in Germany (a coordinated market economy) and the UK (a liberal market economy). The two countries responded to the symmetric economic shock with very similar furlough and business credit schemes to stabilize the demand and supply sides of the economy. However, since these policies fed into very different political-economic structures in both countries, they produced very different results. We attribute this divergence to the effect of “institutional complementarities,” the notion in Varieties of Capitalism that different elements of a system are mutually articulated and, therefore, mutually reinforcing beyond their initial contribution, or vice versa. Our results serve as a cautionary tale to policymakers that introducing policy elements developed in other institutional contexts is complex and challenge us to consider systematically the way in which institutional frameworks actively shape policy outcomes.

Keywords: Covid-19; coronavirus (search for similar items in EconPapers)
JEL-codes: E6 J1 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2022-06-04
New Economics Papers: this item is included in nep-hme and nep-mac
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Published in Perspectives on Politics, 4, June, 2022, 20(2), pp. 474 - 489. ISSN: 1537-5927

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:111059

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