What causes polarized stagnation, corporate economy, or welfare state?: Insights from new development economics

Abstract

This study explores polarized economic stagnation from the perspective of a capitalist corporate economy. It introduces two institutional policy paradigms: economic differentiation (ED) and economic egalitarianism (EE). ED‐friendly “market democracy” promotes shared growth, whereas EE‐friendly “egalitarian democracy” leads to polarized stagnation. The corporate economy is portrayed as the epitome of the ED institution leading shared growth, whereas the redistributive welfare state based on EE institutions could bring polarized stagnation. Empirical analysis tests these hypotheses and discovers that the world's polarized stagnation may be linked to “welfare policy under egalitarian democracy” rather than “corporate growth under market democracy” as commonly thought.