This overall finding is broadly consistent with a long line of work on corporatist
institutions in the OECD, which suggests that the combination of a strong electoral left
and a powerful union movement allows policymakers to negotiate pacts between capital
and labor on wages, investment, and employment that can temper distributive conflicts
and foster good economic outcomes; in contrast, the presence of one in the absence of the other can exacerbate distributive conflicts and produce poor economic outcomes
(Garrett 1998). In particular, this literature stresses the importance of strong left-labor
blocs and corporatist bargaining in moderating labor militancy and encouraging wage
restraint, thus dampening the wage component of inflationary pressures. Not
surprisingly, then, our results suggest that strong left-labor blocs help guard against
inflationary crises, but do not influence the likelihood of other types of crises.
This overall finding is broadly consistent with a long line of work on corporatistinstitutions in the OECD, which suggests that the combination of a strong electoral leftand a powerful union movement allows policymakers to negotiate pacts between capitaland labor on wages, investment, and employment that can temper distributive conflictsand foster good economic outcomes; in contrast, the presence of one in the absence of the other can exacerbate distributive conflicts and produce poor economic outcomes(Garrett 1998). In particular, this literature stresses the importance of strong left-laborblocs and corporatist bargaining in moderating labor militancy and encouraging wagerestraint, thus dampening the wage component of inflationary pressures. Notsurprisingly, then, our results suggest that strong left-labor blocs help guard againstinflationary crises, but do not influence the likelihood of other types of crises.
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