Skip to main content

Advertisement

SpringerLink
Log in

Are bigger governments better providers of public goods? Evidence from air pollution

  • Published:
Public Choice Aims and scope Submit manuscript

Abstract

Theories explaining government size and its consequences are of two varieties. The first portrays government as a provider of public goods and a corrector of externalities. The second associates larger governments with bureaucratic inefficiency and special-interest-group influence. What distinguishes these alternatives is that only in the former is governmental expansion generally associated with an increase in social welfare. In the latter, the link between government size and public goods provision (or social welfare) is negative. We study the empirical significance of these competing claims by examining the relationship between government size and a particular public good, namely environmental quality (notably, air quality measured by SO2 concentrations), for 42 countries over the period 1971–1996. We find that the relationship is negative, even after accounting for the quality of government (quality of bureaucracy and the level of corruption). This result may not prove conclusively that the growth of government has been driven by factors other than concern for the public good, but it creates a presumption against the theory of government size that emphasizes public good provision.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Peacock and Wiseman (1961) argue that growth of government might be due to the existence of a ratchet effect in response to wars, with Higgs (1987) including any national emergency or economic crisis, in this theory. That is, once government spending increases due to a war or depression, it does not fall back to its original levels. Henrekson (1990), however, does not find empirical support for this hypothesis.

  2. While a third subcategory is often mentioned, namely the government as an executor of income-wealth redistribution (Meltzer and Richard 1981, 1983), it seems that this subcategory is not distinct but rather subsumed in one of the previous two. According to classical liberals, income redistribution belongs to the second, while according to socialists to the first category.

  3. It should be noted though that many externalities identified by governments are in practice not true externalities, and thus legitimate targets of government action. And second, even for correctly identified externalities, government intervention often makes things worse.

  4. See Mueller (2003) for a comprehensive summary of the results of such studies.

  5. Earmarks are spending projects that are requested directly by individual members of Congress and are not subject to competitive bidding.

  6. Note that although SO2 travels across borders, it is largely a national problem relative to other air pollutants, such as CO2, which are global and their reductions require the cooperative efforts of many nations due to positive externalities.

  7. Naturally, the cost in terms of public resources may well differ across different measures (for instance whether a production quota is imposed or whether tradeable pollution permits are issued), but in general it will be nonzero.

  8. An increase in the share of government spending in GDP by 10% is associated with an increase in SO2 concentrations by 1.10 percentage points.

  9. Multicollinearity is not a problem since the mean VIF for the model is 1.67 and the VIFs for all variables are smaller than 0.06.

  10. Results are not shown here.

  11. Desai (1998) shows that corruption contributes significantly to environmental degradation in developing countries.

  12. Note, however, that there exist instances where interest groups promote environmental quality in order to sell their products. For example, Brandt and Svendsen (2004) argue that the US wind turbine industry advocated CO2 reductions because it served their own interests.

References

  • Antweiler, W., Copeland, B. R., & Taylor, M. S. (2001). Is free trade good for the environment? American Economic Review, 91(4), 877–908.

    Article  Google Scholar 

  • Barrett, S., & Graddy, K. (2000). Freedom, growth, and the environment. Environment and Development Economics, 5(4), 433–456.

    Article  Google Scholar 

  • Baumol, W. J. (1967). The macroeconomics of unbalanced growth: the anatomy of urban crisis. American Economic Review, 57(3), 415–426.

    Google Scholar 

  • Beck, N., & Katz, J. N. (1995). What to do (and not to do) with time-series cross-section data. American Political Science Review, 89(3), 634–647.

    Article  Google Scholar 

  • Bernauer, T., & Koubi, V. (2009). Effects of political institutions on air quality. Ecological Economics, 68(5), 1355–1365.

    Article  Google Scholar 

  • Berry, W. D., & Lowery, D. (1987). Explaining the size of the public sector: responsive and excessive government interpretations. Journal of Politics, 49(2), 401–440.

    Article  Google Scholar 

  • Brandt, U. S., & Svendsen, G. T. (2004). Fighting windmills: the coalition of industrialists and environmentalists in the climate change issue. International Environmental Agreement: Politics, Law and Economics, 4, 327–337.

    Article  Google Scholar 

  • Brennan, G., & Buchanan, J. M. (1977). Towards a tax constitution for Leviathan. Journal of Public Economics, 8(3), 255–273.

    Article  Google Scholar 

  • Brennan, G., & Buchanan, J. M. (1980). The power to tax: analytical foundations of a fiscal constitution. Cambridge: Cambridge University Press.

    Google Scholar 

  • Bueno de Mesquita, B., Smith, A., Siverson, R. M., & Morrow, J. D. (2003). The logic of political survival. Cambridge: MIT Press.

    Google Scholar 

  • Cameron, D. (1978). The expansion of the public economy: a comparative analysis. American Political Science Review, 72(4), 1243–1261.

    Article  Google Scholar 

  • Chang, K. H., de Figueiredo, R. Jr., & Weingast, B. R. (2001). Rational choice theories of bureaucratic control and performance. In W. Shughart II & L. Razzolini (Eds.), The Elgar companion to public choice. Northampton: Edward Elgar.

    Google Scholar 

  • Cheibub, J. A., Gandhi, J., & Vreeland, J. R. (2010). Democracy and dictatorship revisited. Public Choice, 143(1–2), 67–101.

    Article  Google Scholar 

  • Congelton, R. D. (1992). Political institutions and pollution control. Review of Economics and Statistics, 74(3), 412–421.

    Article  Google Scholar 

  • Desai, U. (1998). Environment, economic growth and government in developing countries. In U. Desai (Ed.), Ecological policy and politics in developing countries: growth, democracy and environment. Albany: State University of New York Press.

    Google Scholar 

  • Environmental Sustainability Index (2005). http://sedac.ciesin.columbia.edu/edu/es/esi/ESI2005.pdf.

  • Frankel, J. A., & Rose, A. K. (2005). Is trade good or bad for the environment? Sorting out the causality. Review of Economics and Statistics, 87(1), 85–91.

    Article  Google Scholar 

  • Fredriksson, P. G., & Svensson, J. (2003). Political instability, corruption and policy formation: the case of environmental policy. Journal of Public Economics, 87, 383–1405.

    Google Scholar 

  • Goel, R. K., & Nelson, M. A. (1998). Corruption and government size: a disaggregated analysis. Public Choice, 97(1), 107–120.

    Article  Google Scholar 

  • Henrekson, M. (1990). The Peacock and Wiseman displacement effect. European Journal of Political Economy, 6(2), 245–260.

    Article  Google Scholar 

  • Higgs, R. (1987). Crisis and Leviathan: critical episodes in the growth of American government. New York: Oxford University Press.

    Google Scholar 

  • Knack, S., & Keefer, P. (1995). Institutions and economic performance: cross-country tests using alternative institutional measures. Economics and Politics, 7, 207–227.

    Article  Google Scholar 

  • Lake, D., & Baum, M. (2001). The invisible hand of democracy: political control and the provision of public service. Comparative Political Studies, 34(6), 587–621.

    Article  Google Scholar 

  • Li, Q., & Reuveny, R. (2006). Democracy and environmental degradation. International Studies Quarterly, 50(4), 935–956.

    Article  Google Scholar 

  • Lopez, R., & Mitra, S. (2000). Corruption, pollution and the Kuznets environment curve. Journal of Environmental Economics and Management, 40(2), 137–150.

    Article  Google Scholar 

  • Lowery, D., & Berry, W. D. (1983). The growth of government in the United States: an empirical assessment of competing explanations. American Journal of Political Science, 27(3), 665–694.

    Article  Google Scholar 

  • Marshall, M. G., & Jaggers, K. (2002). Polity IV dataset. College Park: University of Maryland: Center for International Development and Conflict Management.

  • Mauro, P. (1998). Corruption and the composition of government expenditure. Journal of Public Economics, 69(1), 263–279.

    Article  Google Scholar 

  • McGuire, M., & Olson, M. (1996). The economics of autocracy and majority rule: the invisible hand and the use of force. Journal of Economic Literature, 34(1), 72–96.

    Google Scholar 

  • Meltzer, A. H., & Richard, S. F. (1981). A rational theory of the size of government. Journal of Political Economy, 89(5), 914–927.

    Article  Google Scholar 

  • Meltzer, A. H., & Richard, S. F. (1983). Tests of a rational theory of the size of government. Public Choice, 41(3), 403–418.

    Article  Google Scholar 

  • Midlarsky, M. (1998). Democracy and the environment: an empirical assessment. Journal of Peace Research, 35(3), 341–361.

    Article  Google Scholar 

  • Mueller, D. C., & Murrell, P. (1986). Interest groups and the size of government. Public Choice, 48(1), 125–145.

    Google Scholar 

  • Mueller, D. C. (2003). Public choice III. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Niskanen, W. (1971). Bureaucracy and representative government. Chicago: Aldine-Atherton.

    Google Scholar 

  • Niskanen, W. (1997). Autocratic, democratic and optimal government. Economic Inquiry, 35(3), 464–479.

    Article  Google Scholar 

  • Niskanen, W. (2001). Bureaucracy. In W. Shughart II & L. Razzolini (Eds.), The Elgar companion to public choice. Northampton: Edward Elgar.

    Google Scholar 

  • Olson, M. (1965). The logic of collective action. Cambridge: Harvard University Press.

    Google Scholar 

  • Peacock, A. T., & Wiseman, J. (1961). The growth of public expenditure in the United Kingdom. Princeton: Princeton University Press.

    Google Scholar 

  • Pigou, A. (1932). The economics of welfare. London: Macmillan.

    Google Scholar 

  • Rodrick, D. (1998). Why do more open economies have bigger governments. Journal of Political Economy, 106(5), 997–1032.

    Article  Google Scholar 

  • Rose-Ackerman, S. (1999). Corruption and government: causes, consequences, and reforms. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Scully, G. W. (1991). Rent-seeking in US government budgets, 1900–88. Public Choice, 70, 99–106.

    Article  Google Scholar 

  • Sobel, R. S. (2001). The budget surplus: a public choice explanation (Working Paper 2001-05). West Virginia University.

  • Spilker, G. (2011). Helpful organizations: IGO membership and environmental quality in developing countries. British Journal of Political Science. doi:10.1017/s0007123411000329.

    Google Scholar 

  • Stern, D. I., Common, M. S., & Barbier, E. B. (1996). Economic growth and environmental degradation: the environmental Kuznets curve and sustainable development. World Development, 24(7), 1151–1160.

    Article  Google Scholar 

  • Tanzi, V., & Davoodi, H. (1997). Corruption, public investment and growth (IMF Working Paper 97/139). International Monetary Fund, Washington D.C.

  • Tanzi, V., & Schuknecht, L. (2000). Public spending in the 20th century. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Tullock, G. (1959). Problems of majority voting. Journal of Political Economy, 67(6), 571–579.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Center for Comparative and International Studies (CIS) and Institute for Environmental Decisions (IED), ETH Zurich, Zurich, Switzerland

    Thomas Bernauer & Vally Koubi

  2. Department of Economics and Oeschger Center for Climate Change Research, University of Bern, Bern, Switzerland

    Vally Koubi

Authors
  1. Thomas Bernauer
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Vally Koubi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Vally Koubi.

Appendix

Appendix

1.1 A.1 Country list

Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czechoslovakia, Denmark, Egypt, Finland, France, Germany, Ghana, Greece, Hong-Kong, India, Indonesia, Iran, Iraq, Ireland, Italy, Japan, Kenya, Malaysia, Netherlands, New Zealand, Pakistan, Peru, Philippines, Poland, Portugal, South Korea, Spain, Sweden, Switzerland, Thailand, United Kingdom, United States, Venezuela.

1.2 A.2 Description of variables and data sources

The data set was constructed with data taken from the following sources:

SO 2 concentrations::

log of the median of SO2 concentrations at site j, city i, in country k, at time t; average from all sites for each country and year. GEMS/AIR, US Environmental Protection Agency (US EPA) (http://www.epa.gov/airs/aexec.html)

Government size::

total nominal government spending divided by nominal GDP. International Monetary Fund, International Financial Statistics

Corruption::

corruption index ranging from 0 to 6, with 6 indicating low and 0 indicating high levels of corruption. Knack, Steve and Philip Keefer (2006). IRIS-3: File of International Country Risk Guide (ICRG) Data. 3rd Edition, College Park, Maryland (http://ssdc.ucsd.edu/ssdc/iri0001.html/)

Bureaucratic quality::

bureaucratic quality index ranging from 0 to 6, with 6 indicating high and 0 indicating low levels of bureaucratic quality. Knack, Steve and Philip Keefer (2006). IRIS-3: File of International Country Risk Guide (ICRG) Data. 3rd Edition, College Park, Maryland (http://ssdc.ucsd.edu/ssdc/iri0001.html/)

Polity::

index ranging from −10 (mostly autocratic) to 10 (mostly democratic). Polity IV (http://www.cidcm.umd.edu/inscr/polity)

Income::

3-year average of lagged GDP per capita. The Penn World Tables, NBER (ftp://ftp.nber.org/pwt56/), and International Monetary Fund, International Financial Statistics

Activity::

real GDP/km2 (GDP/population × population/km2). The Penn World Tables

Capital::

capital to labor ratio (the amount of the physical capital per worker). The Penn World Tables

Trade::

ratio of the sum of exports and imports to GDP. The Penn World Tables

Population::

Global Population Distribution Database, The Consortium for International Earth Science Information Network (CIESIN) (http://grid2.cr.usgs.gov/globalpop/1-degree/description.html)

Precipitation::

coefficient of variation of monthly precipitation (the standard deviation of monthly precipitation in a given year divided by the monthly precipitation average in that year). Global Historical Climatology Network (GHCN), National Climatic Data Center of the US National Oceanic and Atmospheric Administration (ftp://ftp.ncdc.noaa.gov/pub/data/ghcn/v1/)

Rights and permissions

Reprints and permissions

About this article

Cite this article

Bernauer, T., Koubi, V. Are bigger governments better providers of public goods? Evidence from air pollution. Public Choice 156, 593–609 (2013). https://doi.org/10.1007/s11127-012-9916-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11127-012-9916-1

Keywords

Search

Navigation