Factor analysis

In this study, a marketization index scale is designed in recognition of different trajectories towards neoliberal societies, varieties of marketization routes. Therefore, the different indicators are not required nor expected to be intercorrelated. Rather, the scale is meant to capture the overall progress towards neoliberalism (marketization) without losing ourselves too much in country variations of how they proceed (whether it is declining union importance or rather opening clauses that provide escape routes out of strict collective agreements, or liberalizing international trade). A combination of several of these, will likely lead to a more market-driven society.

Now all indicators of marketization have been introduced, I want to explore the multidimensionality of the construct ‘marketization’. A factor analysis of all indicators for institutional marketization reveals that there are clearly multiple trajectories towards a convergent outcome: more of, consistent with previous studies (Auer and Cazes, 2003; Baccaro & Howell, 2011; 2017; Chung & Van Oorschot, 2011; Gash & Inanc, 2013). . With regard to the interrelations between these two, the factor analysis is not meant to derive dimensions but to display these interrelations. For the four negative indicators of marketization processes themselves (union density, social expenditures, EPL and FDI strictness), the factor analysis was meant to derive dimensions, next to the correlations analysis.

For this analysis, imputed values were used for missing observations. In imputing, linear inter- and extrapolation were used. Trends were thus assumed to mainly follow a linear line. Because for some

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variables (EPL and FDI strictness) most data were only available from the 1990s on (with some rare observations for the period before), the factor analysis was also ran for 1990 to 2016 (Table 1). The results did not differ much from the findings where the 1960-1989 period was included (not displayed).

As Table 1 shows, the factor analysis clearly suggests that the indicators that deal with the collective () bargaining process are interrelated. The degree of coordination and centralization of the wage-setting bargaining process have both strong loadings on Factor 1 (.82 and .66 respectively), followed by the degree of government influence in such bargains (.52). Union density also has a moderately high loading on this factor (.48). Interestingly, the dummy that signals the absence of opening clauses loads negatively on this factor, indicating that strong unions and coordinated, centralized bargaining is related to having opening clauses in the collective agreement. This is precisely what Baccaro &

Howell’s work (2011; 2017) has indicated for so-called Coordinated Market Economies – showing the importance of combining these different dimensions of marketization in a scale.

Interestingly, the two variables directly dealing with legislation strictness did strongly cluster together in Factor 2. FDI strictness loaded .56 and EPL strictness had a modest .47, albeit negatively. It indicates that having a strict FDI policy is related with a more lax employment regulation system, and vice versa – also indicating that countries proceed towards the common outcome of neoliberalism differently, as Baccaro & Howell (2011; 2017) indicated.

Overall, the indicators cluster relatively modest to high on one factor, and the eigenvalues do not suggest the need for multiple factors. The interest of this study, moreover, is not so much in different marketization trajectories, but rather in the overall influence and diffusion of marketization as such.

Therefore one scale indicating marketization was constructed.

Table 1: Factor analysis marketization and resistance against marketization indicators

Variable Factor1 Factor2 Factor3 Uniqueness

Union Density 0.4792 0.3219 0.2186 0.6190

Bargain coordination -0.8195 0.1045 0.0000 0.3176

Bargain centralization 0.6552 0.3036 -0.0667 0.4741

Governmental influence in bargain 0.5227 0.3049 -0.2417 0.5753

No opening clauses in collective agreement -0.4090 0.1801 0.3673 0.6653 Employment protection legislation strictness 0.4077 -0.4671 0.0578 0.6123

Foreign direct investment strictness -0.2907 0.5594 0.2087 0.5590

Principal factor analysis. 1990-2016

63 2.4.10 Correlations

Table 2 lists the correlations between all variables that relate to marketization, including the resistance attitudes. Note that these are based on unimputed values. To start, the two items that together constitute the measure for resistance against marketization, are highly intercorrelated (r = .63). Among the indicators for the marketization processes themselves, it is interesting to see strong correlations between the variables about the collective (wage-) bargaining process: union density correlates highly and positive with the degree of coordination and centralization of bargaining (r = .42 and .46 respectively). It correlates modestly positive with the degree of government intervention (r = . 16).

Moreover, as seen in the factor analysis, bargain coordination and centralization are highly intercorrelated (r= .57). Moreover, the degree of coordination is highly intercorrelated with the degree of government intervention, as suggested in Höpner (2007), although he suggested that these are nevertheless two separate dimensions of regulated capitalism.

Interestingly, the degree of coordination is modestly negatively interlinked with the strictness of foreign direct investment (FDI) regulation. It appears that these point towards two different, separate trajectories of marketization. Some regimes choose to liberalize international trade while others rely on lowering the degree of coordination of wage-bargaining. Another explanation, however, could be that foreign direct investment regulations is more strongly contingent on factors that exceed the national level.

While FDI strictness is negatively related with the degree of government intervention (r = -.28), another legislative strictness – that of the employment relation – is positively related with government intervention (r = .45). This may be explained by the fact that the government intervention meant in the indicator is mainly concerned with the wage bargain, an important aspect of the employment relationship, while foreign direct investment is a separate area, and perhaps even an alternative strategy, of neoliberal reform.

What this picture again reveals is that marketization is indeed a complicated multifaceted concept that has more dimensions. Moreover, institutional marketization is not necessarily related to a popular cultural anti-marketization framework in societies. Attitudes to not easily match the objective situation: people can desire a set of practices, but that does not imply that this set of practices is strongly applied (Svallfors, 2003). Furthermore, union density reflects a totally different area on which marketization can occur than regulations about international trade do. Apparently, the degree of marketization can differ strongly across areas within countries.

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Table 2: Correlation matrix marketization and resistance against marketization indicators

Resistance against emphasis on work

Resistance against emphasis on money

Union density

Bargain coordination

Bargain centralization

Governmen tal

influence in bargain

No opening clauses in collective agreement

Employment protection legislation strictness

Foreign direct investment strictness Resistance against

society’s emphasis on work

/

Resistance against society’s emphasis on money

.6301*** /

Union density -0.0282*** 0.091*** /

Bargain coordination -0.1939*** 0.160*** 0.417*** /

Bargain centralization -0.0738*** -0.0758*** 0.4599*** 0.5679*** / Governmental influence

in bargain -0.0725*** 0.0256*** 0.1606*** 0.3123*** 0.2378*** /

No opening clauses in

collective agreement -0.2416*** -0.0602*** 0.0153*** -0.1854*** -0.1756*** -0.0103**** /

Employment protection

legislation strictness 0.0023*** -0.0054*** -0.0568*** 0.2820*** 0.3236*** 0.4525*** -0.085*** /

Foreign direct investment

strictness 0.0694*** -0.0055*** 0.0382*** -0.3075*** -0.0279*** -0.2816*** 0.1524*** -0.2713*** / Correlations are in Pearson’s r. ⁺ p < .1, ^* p < .05, ^** p < .01, ^*** p < .001. Correlations based on non-imputed values.

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