Explaining the growth of government in Sweden: A disequilibrium approach

Magnus Henrekson () and Johan Lybeck

Public Choice, 1988, vol. 57, issue 3, 213-232

Abstract: Previous studies aimed at explaining the growth of government in a particular country have failed to distinguish between explanatory variables acting on the supply and demand side, respectively. Alternatively, they have tested one explanation at a time, implying explanatory equations that are misspecified. In addition, no allowance has been made for the fact that the interaction between supply and demand can hardly be assumed to be a self-equilibrating process, where the price of public goods and services adjusts to equate the two. Instead, a framework of disequilibrium seems more appropriate for the analysis of the growth of government. In this study we have identified a number of variables potentially important for the explanation of the growth of government. Each variable was either classified to pertain to the supply or demand side. In the empirical estimations we applied a disequilibrium maximum likelihood method, capable of accounting for the fact that we cannot expect the market for public goods to clear in each period. This method has the further advantage that we are not required to specify a priori whether we are in the supply or demand regime. Concerning the results, our regressions point to the importance of fiscal illusion, notably illusion resulting from an underbalanced budget, and bureaucratic pressure for a larger public sector as the two most important determinants behind the observed growth. A high demand for income redistribution is also found to be an important factor, especially behind the growth of transfers. Furthermore, Baumol's Disease in combination with a low price elasticity of demand seems to contribute strongly to the growth of government consumption. Finally, there is a tendency for coalition governments to let the public sector grow faster than does a one-party government. Copyright Kluwer Academic Publishers 1988

Date: 1988
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://hdl.handle.net/10.1007/BF00124806 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:57:y:1988:i:3:p:213-232

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11127/PS2

DOI: 10.1007/BF00124806

Access Statistics for this article

Public Choice is currently edited by WIlliam F. Shughart II

More articles in Public Choice from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().