Building on Kwon and Pontusson (2003), this paper explores the effects of government
partisanship on welfare spending in advanced capitalist countries over the period 1962-98. The
dependent variable is the annual (inflation-adjusted) growth rate of total social spending per
capita. Our previous paper addressed the thesis, advanced by Pierson (1996) and endorsed by
Huber and Stephens (2001), that the salience of government partisanship for welfare spending
has declined as a result of the expansion of “welfare-state clienteles” (voters who derive much of
their income from the welfare state) and the onset of “permanent austerity.” Pooling observations
from 17 OECD countries, and using moving windows analysis (15-year windows) to capture
changes in the effects of government partisanship, Kwon and Pontusson (2003) show that partisan
effects actually increased significantly from the mid-1970s through the first half of the 1990s.
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The average growth rate of social spending per capita decelerated in this period and, as suggested
by many commentaries, there are good reasons to believe that Left parties have retreated from
their traditional commitment to public welfare provision, embracing a more market-oriented
approach to economic and social policy. However, centrist and especially conservative parties
moved even more sharply to the Right on fiscal and social policy in the 1980s. As the welfare
state has become an object of political contestation, the programmatic differences between Left-
leaning and Right-leaning parties have increased.
In this paper, we add a new twist to this story by introducing the distinction between
liberal and social market economies (LMEs and SMEs). As we elaborate below, recent work
coming out of the Varieties-of-Capitalism school (notably Estevez-Abe, Iversen and Soskice
2001, and Hall and Soskice 2001) emphasizes that the production regimes characteristic of
coordinated market economies (CMEs) benefit from various forms of social protection and public
welfare provisions. In these economies, the VofC school argues, many employers (particularly
large, politically influential employers) as well as workers (particularly workers who are heavily
invested in firm-specific and industry-specific skills) have a strong interest in the maintenance of
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Convention