The rise and fall of government spending in affluent democracies, 1971-2008

David Brady, Hang Young Lee

Research output: Contribution to journalArticleResearchpeer-review

Abstract

One of the enduring conclusions of political economy is that the government’s share of the economy tends to grow over time and with a rising gross domestic product (GDP) per capita. Yet, from the late 1980s through to 2008, government spending as a percentage of GDP declined in the typical year in affluent democracies. Synthesizing and building on literatures on the welfare state, state size and neoliberalism, we evaluate three explanations for the expansion and retrenchment of government spending as a percentage of GDP. We estimate fixed effects models of three measures of changes and cuts in government spending. In the full sample 1971–2008, changes and cuts were driven by the structural pressures of unemployment and trade openness, and the institutional factor of the adoption of the Euro. However, this conceals important historical variation. In the earlier period of expansion, the power resource of unionization was the most robust influence. In the later period of retrenchment, changes and cuts were shaped by the adoption of the Euro and a set of structural pressures. In contrast to previous research, changes and cuts in government spending are not associated with a country’s GDP per capita after the mid-1980s. We conclude by discussing implications for the welfare state and neoliberalism, and by encouraging caution for universal theories of state size.
LanguageEnglish
Pages56-79
JournalJournal of European Social Policy
Volume24
Issue number1
Publication statusPublished - 2014
Externally publishedYes

Fingerprint

democracy
gross domestic product
Gross Domestic Product
neoliberalism
Euro
welfare state
institutional factors
political economy
unemployment
economy
resource
resources

Keywords

  • Neoliberalism
  • government spending
  • political economy
  • retrenchment
  • welfare state

Cite this

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The rise and fall of government spending in affluent democracies, 1971-2008. / Brady, David; Lee, Hang Young.

In: Journal of European Social Policy, Vol. 24, No. 1, 2014, p. 56-79.

Research output: Contribution to journalArticleResearchpeer-review

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