Explaining the Size of the Public Sector: Responsive and Excessive Government Interpretations

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Abstract
Numerous plausible explanations have been offered in an attempt to account for the changing size of government in the United States, but no consistent support exists for any. We believe the failure is due to the fact that the variable being explained--total size of government--is conceptualized at too high a level of aggregation. In this paper, we distinguish between two components of government size: the scope of transfer payments to individuals, and the scope of domestic purchasing activity. Furthermore, the many accounts of public sector expansion are often characterized as either "responsive" or "excessive" government explanations. The former view government as reacting to external demands for expansion, while the latter view government itself as a major cause of growth. Unfortunately, there is little empirical evidence for judging which, if either, of these interpretations is correct. Thus, we develop models of the scopes of government transfers and purchases reflecting both these interpretations. We test the models with time-series data from the post-World War II period.

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