This review sets out a recently developed comparative political economy literature on the Eurozone, which has a basis in both varieties of capitalism and modern macroeconomics. It contrasts the export-oriented, northern European, skill-intensive, coordinated market economies with coordinated wage-bargaining, on the one hand, with the southern European, demand-driven economies with strong public sector unions, on the other. It analyzes the Eurozone as an ongoing grouping of sovereign democratic states, each with strong concerns to remain within the Eurozone but in principle with an exit option. It argues that the origins of the Eurozone and its trajectory primarily reflected national economic concerns and not a political drive toward European integration; and its deflationary preference has been the rational choice of the export-oriented members and their bargaining power in the Eurozone, not an irrational rejection of Keynesianism. The Eurozone functioned well (comparably to the advanced economies outside the Eurozone, though with major imbalances in both) during its “dual growth model” period from inception to the Eurocrisis. The absence of flexible core labor markets suggested by the optimum currency area literature has not impeded its effectiveness; and there has been little Eurozone-generated institution building, except very partially in banking. The only important development, Outright Monetary Transactions, has made the European Central Bank the de facto lender of last resort to fiscally stable member states.

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Lucio Baccaro and Jonas Pontusson make a significant contribution to comparative political economy with their approach to analyzing growth in advanced economies, which focuses on the demand side of the economy and distributive conflict. In contrast to Baccaro and Pontusson, however, we view their approach as reinforcing recent developments in varieties of capitalism rather than undermining them. We also believe that the type of modern macroeconomics used by (for instance) Carlin and Soskice is better placed than their post-Keynesian framework to analyze growth models, and that their approach is not inconsistent with it. Modern macroeconomic models incorporate, as they do not, a role for the state—including monetary and fiscal policy—and provide a coherent framework within which to analyze both the supply and demand sides of the economy; they also enable us to understand the interactions between economies and hence the role of growth models in global imbalances.

The transition from Fordism to the knowledge economy in the world’s advanced democracies was underpinned by the revolution in information and communications technology (ict). The introduction and rapid diffusion of ict pushed up wages for college-educated workers with complementary skills and allowed top managers and CEOs to reap greater rewards for their own talents. Despite these common pressures, income inequality did not rise to the same extent everywhere; income in the Anglo-Saxon countries remains particularly unequally distributed. To shed new light on this puzzle, the authors carry out a panel data analysis of eighteen oecd countries between 1970 and 2007. Their analysis stands apart from the existing empirical literature by taking a comparative perspective. The article examines the extent to which the relationship between the knowledge economy and income inequality is influenced by national labor market institutions. The authors find that the expansion of knowledge employment is positively associated with both the 90/10 wage ratio and the income share of the top 1 percent, but that these effects are mitigated by the presence of strong labor market institutions, such as coordinated wage bargaining, strict employment protection legislation, high union density, and high collective bargaining coverage. The authors provide robust evidence against the argument that industrial relations systems are no longer important safeguards of wage solidarity in the knowledge economy.