Approaches To the Analysis of Government Expenditure Growth

Abstract

The article surveys the literature on public expenditure growth, and makes some suggestions for possible future developments. At the theoretical level, it is argued that public choice and associated theoretical constructs have improved our understanding by insisting that public expenditure growth must be explained by the utility-maximizing behavior of the demanders and suppliers of public services in defined technical conditions, through "political" as well as "economic" behaviour. But what we yet lack is a comprehensive intellectual construct capable of embracing these elements, and also of dis aggregation for purposes of empirical enquiry. After a commentary on the conceptual and econometric problems of establishing empirical laws, the article suggests two potentially complementary approaches: through factor analysis at the general econometric level, and through the development of models of group behavior leading to "explanations" in terms of the changing relationships of social groups through time. The tentative results of an attempt to use factor analysis are summarized, but the authors are conscious of the difficulties and cautious about the potential of either approach.