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Arms and the Man: World War I and the Rise of the Welfare State

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  • Leonard Dudley
  • Ulrich Witt

Abstract

Why did peacetime government shares of total spending double in a number of Western economies between 1910 and 1938? The widely separated dates for the introduction of universal manhood suffrage and the evidence of a rise in protection during the inter‐war period indicate that neither democracy nor globalization can explain this development. This paper reexamines two other explanations, namely, (1) a shift in the demand for public goods and (2) a war‐induced willingness to share with one's fellow citizens. By introducing into Schelling's (1978) Multi‐Person Dilemma a learning game whose payoffs change endogenously, we provide theoretical explanations for this transformation. We then test the resulting propositions with data on public spending as a share of GNP for the U.S., Canada, the U.K., Germany and Denmark, from the 1870s to the 1930s. In each case, we find no unit root but a break in trend, a result shown to favor explanation (2) over (1). Wie ist es zu erklären, dass sich zwischen 1910 und 1938 der Anteil der Staatsausgaben am Sozialprodukt in Friedenszeiten in einer Reihe von westlichen Volkswirtschaften verdoppelt hat? Wegen des zeitlichen Abstands dieses Phänomens von der Einführung des allgemeinen Wahlrechts (für Männer) kommt die Schaffung demokratischer Stimmrechte als Erklärung nicht in Frage. Auch das Argument der Globalisierung kann nicht als Erklärung angeführt werden, wenn man den in der Zwischenkriegszeit zunehmenden Protektionismus in Betracht zieht. In diesem Aufsatz untersuchen wir deshalb zwei andere Erklärungshypothesen. Hypothese (1) unterstellt eine einfache Verschiebung der Nachfrage nach öffentlichen Gütern in den betroffenen Volkswirtschaften. Hypothese (2) nimmt dagegen an, dass es durch den Weltkrieg zu einer Einstellungsänderung der Wahlbürger gegenüber Mitbürgern gekommen ist, die eine größere Bereitschaft zu teilen beinhaltet. Wie eine solche Einstellungsänderung im Mehrpersonen‐Dilemma der Bereitstellung von öffentlichen Gütern möglich wird, zeigen wir, indem wir ein entsprechendes iteriertes Dilemma‐Spiel von Schelling (1978) um Lerneffekte bei den Spielern und endogen variierende Perioden‐Auszahlungen erweitern. Die beiden alternativen Erklärungshypothesen werden anhand der Daten für die Staatsquote in den USA, Kanada, Großbritannien, Deutschland und Dänemark für den Zeitraum zwischen 1870 und den 30er Jahren des 20. Jahrhunderts getestet. Für jedes der Länder finden wir ein Ergebnis, das Hypothese (2) stützt, nicht aber die alternative Hypothese (1). Comment peut‐on expliquer que la part des dépenses publiques dans le PNB en temps de paix ait doublé dans plusieurs économies occidentales entre 1910 et 1938? Les dates éloignées de l'introduction du suffrage universel pour les hommes et l'évidence d'un protectionnisme croissant pendant cette période indiquent que ce développement ne peut s'expliquer ni par la démocratie ni par la mondialisation. Nous réexaminons ici deux autres explications, à savoir: (1) un déplacement de la demande des biens publics et (2) une volonté accrue de partager avec ses concitoyens provoquée par la guerre. Nous offrons des explications théoriques du phénomène en introduisant dans le Dilemme Multi‐Personne de Schelling (1978) un jeu d'apprentissage dont les paiements changent de façon endogène. Ensuite nous testons les propositions qui en découlent avec des données de dépenses publiques en pourcentage du PNB pour les États‐Unis, le Canada, le Royaume‐Uni, l'Allemagne et le Danemark, des années 1870 aux années 1930. Dans chaque cas, nous rejetons l'hypothèse d'une racine unitaire, mais pas celle d'une rupture de tendance, résultat compatible avec l'explication (2) plutôt qu'avec l'explication (1).

Suggested Citation

  • Leonard Dudley & Ulrich Witt, 2004. "Arms and the Man: World War I and the Rise of the Welfare State," Kyklos, Wiley Blackwell, vol. 57(4), pages 475-504, November.
  • Handle: RePEc:bla:kyklos:v:57:y:2004:i:4:p:475-504
    DOI: 10.1111/j.0023-5962.2004.00265.x
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    References listed on IDEAS

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    1. Thomas Brenner, 1999. "Modelling Learning in Economics," Books, Edward Elgar Publishing, number 1815.
    2. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't The US Have a European-Style Welfare State?," Harvard Institute of Economic Research Working Papers 1933, Harvard - Institute of Economic Research.
    3. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't the US Have a European-Style Welfare System?," NBER Working Papers 8524, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Roel Beetsma & Alex Cukierman & Massimo Giuliodori, 2016. "Political Economy of Redistribution in the United States in the Aftermath of World War II--Evidence and Theory," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 1-40, November.
    2. Alberto Alesina & Bryony Reich & Alessandro Riboni, 2017. "Nation-Building, Nationalism, and Wars," Working Papers 2017-80, Center for Research in Economics and Statistics.
    3. J. Ferris & Soo-Bin Park & Stanley Winer, 2008. "Studying the role of political competition in the evolution of government size over long horizons," Public Choice, Springer, vol. 137(1), pages 369-401, October.
    4. Reinoud Joosten, 2011. "Social Dilemmas, Time Preferences and Technology Adoption in a Commons Problem," Papers on Economics and Evolution 2011-09, Philipps University Marburg, Department of Geography.
    5. Stanley Winer & Michael Tofias & Bernard Grofman & John Aldrich, 2008. "Trending economic factors and the structure of Congress in the growth of government, 1930–2002," Public Choice, Springer, vol. 135(3), pages 415-448, June.
    6. J. Stephen Ferris & Soo-Bin Park & Stanley L. Winer, 2005. "Political Competition and Convergence to Fundamentals: With Application to the Politcal Business Cycle and the Size of the Public Sector," Carleton Economic Papers 05-09, Carleton University, Department of Economics.
    7. J. Stephen Ferris & Stanley L. Winer, 2006. "Politics, political competition and the political budget cycle in Canada, 1870 - 2000: a search across alternative fiscal instruments," Carleton Economic Papers 06-05, Carleton University, Department of Economics.
    8. Zhu, Z. & Krug, B., 2005. "Is China a Leviathan?," ERIM Report Series Research in Management ERS-2004-103-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    9. Reinoud Joosten, 2014. "Social dilemmas, time preferences and technology adoption in a commons problem," Journal of Bioeconomics, Springer, vol. 16(3), pages 239-258, October.
    10. J Stephen Ferris & Soo-Bin Park & Stanley L. Winer, 2006. "Political Competition and Convergence to Fundamentals: With Application to the Political Business Cycle and the Size of Government," CESifo Working Paper Series 1646, CESifo.
    11. Alberto Alesina & Bryony Reich & Alessandro Riboni, 2020. "Nation-building, nationalism, and $$\hbox {wars}^*$$ wars ∗," Journal of Economic Growth, Springer, vol. 25(4), pages 381-430, December.

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