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The size of government

  • James Kau
  • Paul Rubin

Most research on the causes of growth in government expenditure has focused on the demand for government services. In this paper, we argue that in fact this growth may have occurred because of changes in supply. Changes in technology leading to increased specialization and thus increased opportunity costs of self-production have led to increased market production and increased record keeping. Also, female labor force participation has increased. Both of these factors serve to reduce the (efficiency) cost of collecting taxes; if the demand for government spending has not changed, this increase in supply would lead to a larger public sector. We estimate a system of simultaneous equations for the period 1929–1970 incorporating this hypothesis, and the results are consistent with the theory. We are able to explain virtually all of the growth of government; increases in female labor force participation seems to be a very important variable in this explanation. Copyright Martinus Nijhoff Publishers 1981

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File URL: http://hdl.handle.net/10.1007/BF00138246
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Article provided by Springer in its journal Public Choice.

Volume (Year): 37 (1981)
Issue (Month): 2 (January)
Pages: 261-274

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Handle: RePEc:kap:pubcho:v:37:y:1981:i:2:p:261-274
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  1. Kau, James B & Rubin, Paul H, 1979. "Self-Interest, Ideology, and Logrolling in Congressional Voting," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 365-84, October.
  2. Singh, Balbir, 1973. "Making honesty the best policy," Journal of Public Economics, Elsevier, vol. 2(3), pages 257-263, July.
  3. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  4. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 209-87, October.
  5. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
  6. Friedman, David, 1977. "A Theory of the Size and Shape of Nations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 59-77, February.
  7. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185.
  8. Barzel, Yoram, 1976. "An Alternative Approach to the Analysis of Taxation," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1177-97, December.
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