"Varieties of Capitalism, Growth Models and Inclusive Growth"

Generating rising prosperity for middle- and lower-income households is a fundamental objective for rich countries. We examine whether cross-country variation in the evolution of living standards for this group can be explained by predictions derived from ideal-type classifications in the comparative political economy (CPE) literature. We aim to contribute to the CPE literature by putting inclusive performance, measured as the ability of an economy to provide growth in below-median incomes, at the centre of the analysis. To do so, we draw on comparative micro-data from household surveys over recent decades and analyze differences in below-median income growth within and between various country groupings, based on the Varieties of Capitalism literature as well as the more recent research on “growth models”. Preliminary results indicate a wide variation across rich countries in average growth rates in real household income at the 30th and the 10th percentile of the distribution. Further investigation will allow establishing the relative relevance of various CPE models in identifying the political economy determinants of rising prosperity below the median.