Corporatism as a Multidimensional Phenomenon

As discussed in section 4.3, corporatism is a highly complex phenomenon. Several features of it are theoretically and empirically closely related, and which one of them is the true causal factor responsible for a certain outcome can hardly be identified. Taking into account the multidimensionality of the concept, a composite measure of corporatism (CORPORATISM) developed by Hicks and Kenworthy (1998) is used in the analysis. The indicator is taken from a dataset of corporatism measures compiled by Lane Kenworthy²⁵. The indicator has several advantages over its alternatives. Firstly, it heavily weighs tripartite policy concertation in the composite index, which is the most important dimension for the theoretical argument. Secondly, it focuses not only on measures of union strength like so many indicators, but also includes an item for the strength of business confederations. Last but not least, it varies over time and covers the widest range of countries and time-points of the measures available.

The composite measure consists of seven items which were derived by Hicks and Kenworthy (1998) from a larger set of cooperative institutions through factor analysis.

They include measures of encompassing, centralized structures of business confederations, coordinated wage bargaining, cohesive government-interest group interrelations, an index of tripartite corporatism derived by Lijphart and Crepaz (1991), an index of social-democratic corporatism developed by Hicks and Swank (1992), measures for investor-firm cooperation, and labor-management cooperation.

At first sight, it seems questionable on theoretical grounds whether investor-firm relations and shop-floor cooperation of management and labor should be included in an index that measures cooperation on the macro-level. Hicks and Kenworthy (1998: 1644-1646) argue that in a historical perspective, strong and stable financial relationships between firms and banks fostered the formation of industrial associations. Investments took not only the form of long-term loans but also of equity ownership. The result was a strong bank control of industry which furthered the establishment of business confederations to allow industry to make itself heard in these “voice-based partnerships” (Hicks & Kenworthy, 1998: 1644).

25 For a description see Kenworthy (2000).

Data, Operationalization, and Hypotheses 54

As a reaction, the strong organization of business fostered the development of nationally comprehensive union organizations to counteract the increased power of employers.

Whereas investor-firm cooperation is seen as part of the historical development of corporatism, labor-management cooperation is argued to be a consequence of macro-level cooperation. Union coordination and tripartite neo-corporatist arrangements are supposed to have encouraged the passage of legislation that limits the discretion of large companies and favors codetermination of workers (Hicks & Kenworthy, 1998: 1646). Whether or not one shares this theoretical reasoning, the fact remains that both items load heavily on the same factor as the other measures which are more unambiguously identified with macro-level corporatism. Even if these are just chance correlates, the scores for the overall measure should not be distorted.

Another issue is the measurement of the different items. Most of them are measured annually but relatively crudely by classifying institutions as either highly (receiving a score of 1), moderate (0.5), or weakly cooperative (0). The items for social-democratic and tripartite corporatism unfortunately do not vary over time and just reflect ordinal rankings of countries. Hence, the composite corporatism variable cannot be regarded as interval scaled, which sets limits to a rigorous interpretation of its regression coefficient. The final score for the composite indicator was derived by averaging the items for each year. It is not obvious why the factor loadings were not used to calculate weighted averages. In summary, the corporatism indicator is the most problematic in terms of measurement and conceptual ambiguity used in this analysis, but no better alternatives were obtainable.

Similar to veto players, corporatist settings are expected to hinder governments in realizing their preferred policies. Again, this can be tested through an interaction with government ideology. Corporatist arrangements should decrease the impact of government ideology on government size:

H3: IDEOLOGY x CORPORATISM is negatively correlated with GOV.

As noted earlier, this hypothesis stands in contrast to social-democratic corporatism theory.

According to this view, it is the combination of a left party in government with its backing by strong unions in society which yields the necessary power resources for a distinct

Data, Operationalization, and Hypotheses 55

partisan policy (Cusack & Garrett, 1992; Garrett, 1995, 1998). A positive relationship between the interaction term and government size would support this theory. Furthermore, whereas no independent effect of corporatism is expected in line with the theoretical argument made above, a positive impact would be consistent with social-democratic corporatism theory, which argues that trade unions are in a favorable position to realize their interests especially through their involvement in corporatist institutions (Swank, 2002: 41).

Figure 5.4: Variation in Corporatism by Country, 1964-1993

CORPORATISM

.01 .5 .99

AUS A

BEL CAN

DK FIN

FRA GER

IRE ITA

NLD NOR

SWE CH

UK USA Source: Kenworthy (for source description see table A6).

Notes: Composite corporatism indicator according to Hicks and Kenworthy (1998). For country codes see table A1.

Not surprisingly, figure 5.4 shows very little variation in corporatism for all countries²⁶. The corporatism scores for Austria and Switzerland do not even vary at all. Nevertheless, the figure is informative in that it points to cross-sectional differences. The Anglo-American countries were consistently characterized by rather pluralist interest group systems, in contrast to the Scandinavian systems, which were highly corporatist over the

26 For a graphical representation of the corporatism variable over time for individual countries see figure A3.

Data, Operationalization, and Hypotheses 56

whole period. Austria showed a similarly high level of corporatism. The remaining continental European countries took intermediate positions between these two extremes.