From a Particularistic to a Liberal Welfare Regime? Recent Evolution of the Tax Structure in Japan and Korea

The social welfare system in Japan and Korea has changed significantly since the 1990s. Apart from the traditional particularistic features which favored those workers in core public and private economic sectors, welfare benefits have come more universalistic to cover broader groups of populations. With these changes, some studies assert that the social welfare system in Japan and Korea has become a part of the general liberal variant of social welfare in OECD countries.

Focusing on the revenue side of this evolving welfare system, I provide further evidence to the converging trend toward welfare liberalism in the East Asian countries. Updating Mendoza et al (1994)’s and OECD (2000, 2001)’s aggregate effective taxation data to cover more recent periods, I find that not only the overall tax level has increased in these countries, but the tax structure itself has also become closer to that of the liberal regime. In particular, I find that taxation on labor and consumption has increased to a comparable level to the liberal countries – although capital taxation still remains lower and the overall taxation is more regressive than in the liberal countries. I present a politics-centered explanation for this emerging tax regime in Japan and Korea, paying close attention to the nature of political coalition building and party competition in the globalized, post-industrial economy. In doing so, I add validity to a broad claim that it is time to research Japanese and Korean welfare states in an extended family of liberal welfare in OECD countries.