Author(s): Philippe Coffre
This paper develops a theoretical framework explaining how robust private efficiency can coexist with aggregate inefficiency through a process we term institutional dissipation. Drawing on comparative political economy, we integrate insights from Hall and Soskice (2001), Iversen and Pontusson (2010) and Mazzucato (2018). We argue that institutional configurations mediate the translation of firm-level efficiency into broader social outcomes, thereby shaping national differences in the relationships among productivity and collective welfare. Our theory combines institutional and behavioural mechanisms to explain how economies exhibiting high private efficiency may nonetheless produce lower aggregate welfare when institutional architectures fail to sustain social investment.