Long Swings In The Growth Of Government Expenditure: An International Historical Perspective

Using an international historical perspective this study aims at identifying the main empirical regularities, as well as countries' similarities and differences, in the long-run growth pattern of government expenditure, in order to distinguish among existing, competing theories of government growth. The application of nonparametric and parametric analyses to a sample of developed countries observed over the 1880-2011 period allows us to detect two main findings. The first is that, beyond the long-term growth of government expenditures in absolute terms, there is evidence of three expansionary long waves corresponding to the pre-armament booms in the WWs periods and the "golden age of public sector intervention". The latter is the reduction of the degree of cross-country heterogeneity in the pattern of relative and absolute growth of government expenditure since the 1960s. The "ratchet phenomenon" in the pre-WWII period and the change of the prevailing ideology from market failures to government failures in the more recent period provide explanations complementary to Wagner's law and consistent with the observed long-term evolution of the relative (and absolute) growth of government expenditure.