MEASURING GOVERNMENT GROWTH IN THE AMERICAN STATES

Abstract

In recent years there has emerged a substantial body of research pertaining to growth in the size of the public sector, which is often measured in terms of government spending as a proportion of total economic output in a given political system. Unfortunately, the work in this research program suffers from two major shortcomings: (1) inattention to patterns of government growth disaggregated to the subnational level, and (2) a failure to take into account the effects of different price deflators for the public and private sectors on the ratio of government spending to economic output. In this article I examine patterns of government growth in the 50 American states for the period from 1945 to 1984. Unlike most previous studies, I utilize different implicit price deflators for the public and private sectors in order to separate growth in the scope of government activity from deflator-based growth in the public sector. The results of this analysis suggest that, on average, almost one-half of the growth in state government over the time period under study can be attributed to the different inflation rates for the public and private sectors. Such a finding has significant theoretical and methodological implications for the study of government growth, particularly at the state level.

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