In this chapter I compare the change and stability in wage-bargaining institutions and macroeconomic policy regimes in five Northern European countries over the past two decades. As argued in the introductory chapter the five countries — Austria, Denmark, Germany, Norway, and Sweden — pose interesting puzzles for comparative political economy because, despite many institutional, political, and economic similarities, the Scandinavian countries have experienced profound changes in labor market institutions and economic policy regimes since the early 1990s while the German-speaking countries have exhibited remarkable stability. One of the primary objectives of this chapter is to employ the model of contested economic institutions to explain why political economies that are usually classified as “corporatist” exhibit such divergent trajectories of change. In particular, I want to challenge the widespread notion that the five countries represent minor variants of the same “Northern European Model.” Instead, I argue that these cases, at different points in time, exemplify distinct institutional varieties of organizing labor markets and adjusting to changing world market conditions. By showing that different combinations of bargaining institutions, macroeconomic regimes, and welfare states have distinct distributional outcomes, I also wish to dispel the idea that it is sufficient to analyze these institutions as collective goods.

Part of the analysis explores how the interaction between wage-bargaining institutions and macroeconomic policies tends to produce specific economic outcomes and national patterns of economic policy-making. This analysis is in broad agreement with the historical institutionalist tradition (e.g., Katzenstein 1985; Zysman 1983; Hall 1986; Thelen 199D, although I place greater emphasis on the rational pursuit of group interests than do most in this tradition. I am not, however, primarily concerned with how institutions constrain the strategic choices of economic agents and governments. The main part of the analysis is concerned with how institutions are being reconstructed as a result of such choices. Thus, on the one hand, the analysis shows how differences in pathdependent national institutions in the five cases have conditioned their political and economic capacity to adjust to exogenous changes in technology and international economic conditions. On the other hand, it shows how these different institutional capacities have created pressure for institutional change in some cases, but not in others, and how this pressure has triggered sectoral realignments and changes in macroeconomic regimes.