On the size and growth of government

The size of the U.S. federal government, as well as state and local governments, increased dramatically during the 20th century. This paper reviews several theories of government size and growth that are dominant in the public choice and political science literature. The theories are divided into two categories: citizen-over-state theories and state-over-citizen theories. The relationship between the 16th Amendment to the U.S. Constitution and the timing of government growth is also presented. It is likely that portions of each theory can explain government size and growth, but the challenge facing economists is to develop a single unifying theory of government growth.Economic development ; Expenditures, Public ; Local government ; Federal government

Does government spending really crowd out charitable contributions? new time series evidence

We exploit the time series properties of charitable giving data to provide additional insights into the crowding out of charitable contributions in response to government spending. We find that the short-run and long-run government spending and charitable giving relationships are quite different - the long run relationship appears to be largely spurious, and estimates of the short-run relationship provide only weak evidence of crowding out. We also find that system estimation can improve upon the efficiency of single equation models used in previous works. Our results support the prestige theory of charitable giving and the rational ignorance of citizens.Nonprofit organizations ; Charitable bequests

Social security versus private retirement accounts: a historical analysis

This paper compares Social Security benefits relative to those paid from private investments: specifically, whether 2003 retirees would gain more retirement income if they had invested their payroll taxes in private accounts during their working years. Three different retirement ages and four possible earnings levels are considered for two private investments-6-month CDs or the S&P 500. On average, the results suggest less than 5 percent of current retirees would receive a higher monthly benefit with Social Security. Several Social Security reform proposals are described.Social security ; Pensions ; Individual retirement accounts

Economic freedom and employment growth in U.S. states

The authors extend earlier models of economic growth and development by exploring the effect of economic freedom on U.S. state employment growth. They find that states with greater economic freedom—defined as the protection of private property and private markets operating with minimal government interference—experienced greater rates of employment growth. In addition, they find that less-restrictive state and national government labor market policies have the greatest impact on employment growth in U.S. states. Beyond labor market policies, state employment growth is influenced by state and local government policies, but not the policies of all levels of government, including the national government. Their results suggest that policymakers concerned with employment should seriously consider the degree to which their own labor market policies and those of the national government may be limiting economic growth and development in their respective states.Economic development ; Employment

Disallowances and overcapitalization in the U.S. electric utility industry

Regulation of an industry often produces unintended consequences. Averch and Johnson (1962) argue that certain regulation of electric utilities provides utilities the incentive to purchase an inefficiently large amount of capital. Another possible and related unintended consequence of electric utility regulation is that regulatory cost disallowances on capital may also increase utilities' incentives to overcapitalize. The authors provide theoretical evidence that capital expenditure disallowances will increase the Averch and Johnson effect in some instances and thus may have contributed to the overcapitalization problem that regulation was designed to discourage. Our model shows that disallowances can reduce the rate of return on investment and thereby increase the Averch and Johnson distortion.Electric utilities ; Energy industries

Institutions and government growth: a comparison of the 1890s and the 1930s

Statistics on the size and growth of the U.S. federal government, in addition to public statements by President Franklin Roosevelt, seem to indicate that the Great Depression was the primary event that caused the dramatic growth in government spending and intervention in the private sector that continues to the present day. Through a comparison of the economic conditions of the 1890s and the 1930s, the authors argue that post-1930 government growth in the United States is not the direct result of the Great Depression, but rather is a result of institutional, legal, and societal changes that began in the late 1800s. Thus, the Great Depression did likely trigger increases in government spending and regulatory involvement, but historical factors produced the conditions that tended to lend permanence to the growth of government that occurred during the Great Depression.Federal government ; Depressions

Institutions and government growth: a comparison of the 1890s and the 1930s

Statistics on the size and growth of the U.S. federal government, along with the rhetoric of President Franklin Roosevelt, seem to indicate that the Great Depression was the event that started the dramatic growth in government spending and intervention in the private sector that has continued to the present day. Through a comparison of the economic conditions of the 1890s and the 1930s, we argue that post-1930 government growth in the United States is not the direct result of the Great Depression, but rather is a result of institutional, legal, and social changes that began in the late 1800s.Economic history ; Economic development