Institutional Complementarity Analysis

Institutional complementarity analysis is a comparative-capitalism framework, central to the varieties-of-capitalism program of Peter Hall and David Soskice (2001) and to Masahiko Aoki's comparative institutional analysis (2001), for explaining why national economic models cohere into a small number of stable types rather than mixing institutions freely. Two institutions are complementary when the presence of one raises the returns to, or the efficiency of, the other — so that the value of any one arrangement depends on the configuration of the rest. Because complementary institutions reinforce each other, economies tend to settle into coherent clusters (such as coordinated and liberal market economies), and Bruno Amable (2003) extended the logic to a richer typology of five models defined across multiple institutional domains. The framework supplies the micro-logic behind both the coherence and the path dependence of national capitalisms.