Abstract
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.
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The authors would like to thank Gordon Tullock for helpful comments.
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Kau, J.B., Rubin, P.H. The size of government. Public Choice 37, 261–274 (1981). https://doi.org/10.1007/BF00138246
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DOI: https://doi.org/10.1007/BF00138246