DETERMINANTS OF GOVERNMENT EXPENDITURES: NEW EVIDENCE FROM DISAGGREGATIVE DATA
| Published date | 01 February 1995 |
| DOI | http://doi.org/10.1111/j.1468-0084.1995.tb00027.x |
| Date | 01 February 1995 |
OXFORD BULLETIN
OF
ECONOMICS AND STATISTICS,
57.
I
(1995)
0305-9049
DETERMINANTS
OF
GOVERNMENT
EXPENDITURES: NEW EVIDENCE FROM
DISAGGREGATIVE DATA
Minh
Quang
Daot
I.
INIRODUCTION
The present paper seeks
to
explain differences
in
per capita expenditures
on
government services among countries. This is achieved by applying a model
of
per capita spending for government services developed by Dao
(
1994).
The present study differs from the paper by Dao in several respects. First, the
issue
of
the median voter model
is
addressed along with the problems
associated with its use.
An
explanation for using mean, rather than median,
income in the theoretical framework
is
provided. Second, rather than focus-
ing
on
total government expenditures, we isolate and analyze specific govern-
ment services. Such a disaggregation of the data is necessary in testing
Wagner's law
of
expanding state activity. Third, the most updated data
set
compiled by Heston and Summers
(1991
)
is utilized. Fourth, since one may
expect non-linearities
in
the effects
of
population on government spending
for
public services, we choose
to
examine a sub-sample
of
small LDCs with
populations less than
20
million.
Data
on
population, per capita GDP, and the relative price
of
public sector
output
are
taken
from the data set published by Summers and Heston
(1991)
containing valuable annual estimates
of
output, investment, consumption,
and government services
on
an internationally comparable basis. The relative
price
of
government output
is
an index using the United States as the base
country.' Data for the level
of
urbanization, government expenditures
on
social security and welfare, public expenditures
on
education, health, and
housing come from Kurian
(
1990).
Data
on
defense expenditures are taken
from
IMF
(1990)
and Kurian. Data
on
area (used
to
calculate population
density) are from World
Bank
(1
990).
While data
on
public spending for
defense, education, health, and housing are available for
105
countries,
government expenditures on social security and welfare can be obtained from
'
Prices
of
government services in developed economies relative
to
those in the United States
are generally higher than those
in
LDCs. Irving Kravis
et
al.
(1982,
p.
21)
report remarkably
wide cross-country variations
in
the domestic prices
of
government services.
67
0
Basil Blackwell
Ltd.
1995.
Published by Blackwell Puhlishcn. 108 Cowley
Road.
Oxford
OX4
IJF.
uK
.&
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USA.
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