Towards sustainable redistributive outcomes: the role of institutional design

This study proposes the role of institutions as the ‘missing link’ in achieving sustainable and inclusive growth outcomes across countries facing vastly different structural challenges in the socio-ecological transition. This study models feedback loops created by the interplay between institutions and economic growth at the country-level through the moderating effects of their interaction and their implications on policies that target income inequality and environmental degradation across different countries. For a sample of 24 countries in the expanded Varieties of Capitalism (VoC) literature over the period of 2005-2019, the study conducts dynamic panel data analysis using the Gini coefficient for household disposable income inequality as the dependent variable. The study finds evidence for significant joint effects for the inequality-increasing effects of economic growth. Liberal market economies (LMEs) and patrimonial market economies (PMEs) are shown to exacerbate this effect. The opposite is observed with mixed market economies (MMEs) and dependent market economies (DMEs). As results suggest that economic growth can be inclusive, the sustainability of a virtuous feedback loop must be ensured through an effective and context-specific policy intervention.