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Transaction-Cost Economics and Cross-National Patterns of Industrial Conflict: A Comparative Institutional Analysis

John D. Robertson
American Journal of Political Science
Vol. 34, No. 1 (Feb., 1990), pp. 153-189
DOI: 10.2307/2111514
Stable URL: http://www.jstor.org/stable/2111514
Page Count: 37
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Transaction-Cost Economics and Cross-National Patterns of Industrial Conflict: A Comparative Institutional Analysis
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Abstract

At the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise. Without capital, the material condition upon which labor's interests are realize would be impossible. Likewise, without labor's consent to exchange wages for future investment, capital could not procure the profits and savings necessary for its reproduction and transformation. Organizing stable and cost-efficient class coalitions has long been recognized as not merely an economic priority but a political challenge. Yet, some democracies have met this challenge more successfully than others. For the student of comparative political economy, an enduring question remains: Why? The present study is an attempt to provide an answer that complements and integrates the more common macro- and microanalytic studies of industrial conflict. It is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise. By employing the logic of transaction-cost economics, the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange-shaping consensus within a political economy's industrial relations system. The resulting transaction-cost efficiency model of industrial conflict specifies the ex ante cost factors (price margin of transaction and the institutional control of bounded rationality) and the ex post cost factors (legislative polarized pluralism, executive hegemony, and the frequency of general elections) central to the process of building and sustaining class coalitions. The model is tested on data drawn from 19 democracies covering the years 1965-83. Use of simulation models reveals the relative trade-offs associated with different patterns of ex ante and ex post cost structures.

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