Research Highlights

An important stream of literature called the varieties of capitalism (VoC) argues that capitalist economies can be classified into several types, including liberal market economies (LMEs) and coordinated market economies (CMEs), and, moreover, that the classification between LMEs and CMEs is stable over time in terms of performance and grouping. This study revisits such 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 three criteria of GDP growth rate, employment rate (employed/population), and top 10% income shares over the 1955?2014 period. Results of the cluster analysis first identify four important types of capitalism, namely, Anglo-Saxon economies (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, high employment), and East Asian (i.e., high growth and low inequality). Thereafter, East Asian countries, such as Japan and South Korea, have recently converged to the Anglo-Saxon capitalism. Moreover, many European countries have not converged to the Anglo-Saxon capitalism, with Taiwan joining this group. On the one hand, results provide certain support to the original view of the VoC literature on the stability of the different types of capitalist economy, particularly given the lack of convergence between the Anglo-Saxon and European economies. This phenomenon may have been caused by the path-dependency and institutional complementarities among the elements constituting the different types of capitalism. On the other hand, Asian economies with short history have converged to either of the long-standing types of capitalism based on the bifurcation of these economies into either the Anglo-Saxon economy (e.g., Japan, South Korea) or the Nordic European model (e.g., Taiwan).