The dynamics of public spending

This paper provides a model-based account of the forces shaping the dynamics of government spending in the industrialized democracies over the past few decades. The principle argument is that both short-term and long-term forces have been at work in the evolution of government spending in these countries. Emphasized here is the important role that the prevailing center of political gravity within the polity as well as the constraints that recent movements toward the integration of national capital markets into the international economic system have played in bringing about changes in government spending levels. Incorporated in the model are the hypothesized effects, in both the short and long run, of a set of cointegrated independent variables, as well as a set of other terms with impacts that are likely to be short run. The hypotheses surrounding this formulation are systematically tested and then a more encompassing model that includes the effects of domestic politics and international economic conditions is then presented and evaluated.