Partisan Differences, Varieties of Capitalism and the International Financial Crisis: Political Determinants of the Fiscal Political Crisis Reaction of the OECD Member States

The project analysed the different fiscal policy reactions to the recent financial crisis. The project was successfully completed in 2013. Although the OECD member states all had to face a similar challenge – though to a different degree - by the international financial and economic crisis, their reactions to the crisis varied a lot. Thus the research project focused on the differences in the fiscal political reactions to the international financial and economic crisis. Many states passed large economic stimulus packages, while others relied on a restrictive fiscal policy even in times of economic crisis. Also with respect to the composition of the financial packages the OECD member states differed a lot: While some states boosted public expenditure, others focused on a conjuncture stimulus via tax reduction. The aim of the research project was to identify the driving political determinants behind the different fiscal policy reactions to the economic crisis by the OECD member states with regard to the size and composition of the fiscal packages by combining fuzzy-set Qualitative Comparative Analyses with comparative case studies. The project results show the explanatory paths to the different fiscal policy reactions to financial crisis. The results were published and presented at international conferences. The publication of further results will follow in 2014. The results show that there was no necessary condition for the implementation of large FSPs. The analysis of sufficiency provides some support for the dominance of the classic partisan hypothesis regarding the extent of the fiscal political reaction. Left-wing governments represent one sufficient solution path for the outcome ‘Large Fiscal Stimulus Packages’. The same holds true for sheltered LMEs and CMEs with open economies and rather weak trade unions. Low deficits - indicating a major fiscal leeway - in conjunction with an open economy or strong trade unions formed a sufficient conjunction of conditions for large FSPs. In contrast, the analysis lends no support to the hypothesis of conditional partisan effects depending on the degree of coordination within the market economy.