(Page 3 of 38) - National Local Political Economies and Varieties of Capitalism: A Classification and Analysis of 21 Developed Democracies authored by Sellers, Jefferey.

For decades now, growing body of work on the global economy from a variety of

perspectives points to the increasing prominence of cities and regions as actors as well as sites of
economic activity (Sabel, 1989; Ohmae, 1996; Sassen, 2000). The sources of this prominence
include growing responsibilities for governance at the regional and local level within states as
well as the opening of new opportunities and challenges from increasingly transnational markets
(Sellers, 2002, Ch. 3). In scrutinizing the global economy in terms of territories within national
states, the study of political economy at the local and regional level challenges not just the
findings but the units of analysis that have long dominated the study of international and
comparative political economy. Work on globalization in comparative political economy and
public policy has so far rarely acknowledged this challenge. Analysts of welfare states (Esping-
Andersen, 1990; Huber and Stevens, 2001; Swank 2002) or systems of capitalist institutions
(Hall and Soskice 2001) continue to aggregate subnational variations into national units, and
analyze these without attention to domestic territorial variations. Such a presumption flies in the
face of both the wide variation that such work as Culpepper (2001), Herrigel (1996) and Locke
(1995) has shown among the regional and local economies within many nation-states. Indeed,
theoretically compelling arguments point to dynamics of markets and social relations within and
among localities as a source of much of the character of national and supranational political
economies (e.g., Sbragia 1999; Le Gales 2002).

Any attempt to resolve this disjuncture requires closer attention to how both markets and

political decisionmaking at subnational levels nest within the institutions of national political
economies. Although the political economy of federalism (e.g., Elazar 1999; Treisman 2000;
Lijphart 1999) offers intriguing starting points for such an account, it neglects the local and
metropolitan governments that often play a more important role in territorial political economies.
Existing typologies of local government (Page and Goldsmith 1987; Hesse and Sharpe 1991;
Pierre 1999; Vetter 2000) have so far failed to fill this gap. Even more general accounts of
multilevel governance have so far ventured little analysis of the interplay between market
economies and multiple tiers of government (e.g., Marks and Hooghe 2001). This article,
drawing on data from twenty-one OECD countries, develops the first systematic classification
for national political economies of local government. The results demonstrate how the local
government systems of contemporary developed countries correspond to such national
institutional attributes as corporatism, welfare states and consensual democracy rather than to
territorial arrangements at the higher levels of states. At the same time that the presence of these
systems clarifies the important role that national political economies play in urban and regional
political economies, it highlights the crucial role of territorial institutions that current
comparative and international political economy has neglected.

Comparative Capitalism, Interlocal Markets and Local Public Goods

The analysis here takes local government systems and other elements of the state that

reach to the level of localities as a set institutional conditions that actors in markets as well as
others in each locality face within the territorial bounds of a given state. As work on fiscal
federalism (Tiebout), “market-preserving federalism” (Weingast 1995, 2000) and the political
economy of local governance (Peterson 1981; Stone 1989) has made clear, the spatial dynamics
of markets are inextricably tied to these properties of local government and other territorial