International regulatory diversity over 50 years: political entrepreneurship within fiscal constraints

Over the last 50 years, economic freedom in modern capitalist democracies has increased although the regulatory state has expanded considerably, resulting in the paradox of “freer markets, more rules” (Vogel, 1996). We provide a hierarchical cluster analysis of the policy trajectories of OECD countries over the last 50 years, as well as a theoretical framework that builds on Stigler’s (1971) theory of economic regulation. Our findings suggest that these developments are not the result of ideological narratives such as “neoliberalism,” but instead we confirm some claims from the “varieties of capitalism” and “regulatory capitalism” literatures using independent methods. Our approach is better able to explain the diversity of regulatory regimes across countries than existing approaches that focus on either national patterns or policy sectors, and we also provide a fuller account of government crowding-out and crowding-in effects across the entire structure of production.