Long-Run Growth of Nondefense Government Expenditures in the United States

Abstract

To test a number of hypotheses regarding determinants of long-run trends Abstract in nondefense government expenditures, regression equations were estimated by the method of least squares using the following dependent variables: government purchases of goods and services (i.e., resource-using public expenditures) excluding defense; government transfer payments; and nondefense public expenditures, the sum of the first two. All were deflated for price level change and population growth. Three periods were used: 1900-1928, 1929-1969, and 1900-1969. The research tends to validate the influence of "Baumol's Disease, " which implies exponential growth of public expenditures on account of price effects due to a systematic public-private productivity-growth differential. The results cast doubt on the Peacock-Wiseman "displacement effect," which holds that public expenditures grow more rapidly than normally, immediately following wars or other "social upheavals, " because these events shift taxpayers' notions of maximum tolerable levels of taxation.

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