Introduction: Motivation, the Explanandum, and a Road Map

Almost every developed democracy has at least doubled since World War II the share of its GDP allocated to tax-and-transfer (T&T) systems (see Figure 1.4). Notwithstanding this large and fairly common upward trend, however, much variation remains. For example, eight countries amassed T&T over 20% of GDP by 1995, while five had T&T closer to 10%; and, whereas Dutch T&T more than sextupled before growth abated, German T&T less than doubled in the same time. This chapter applies the cycle of political economy approach to comparative democratic policy making introduced in Chapter 1 and diagramed in Figure 1.22 to guide theoretical and empirical exploration of these commonalities and differences. The total variance in Figure 1.4 can be segregated into three parts to explain: crosscountry postwar-average differences, a shared cross–time path, and variation unique to country-time (i.e., the remainder).

Figure 1.5 plotted transfers (% of GDP) averages and variation by country. The wide differences across countries' postwar averages shown there covers 42.9% (±) of the total variation, and differences in postwar variation of T&T experiences within countries are also large. For example, Dutch and Belgian T&T averaged well over twice Japanese T&T, and a plus-or-minus standard deviation range around the Dutch mean quadruples (±) corresponding Australian and German ranges. Similarly, Figure 1.6 plotted T&T by year, highlighting the shared time path and variation about it.