Public Finance and The Size of Government: A Literature\ud Review and Econometric Results for Fiji: Discussion Paper No. 108

Abstract

This paper analyses current government expenditure in Fiji using annual time series data for\ud the period 1969-1999. Alternative theories of government expenditure are reviewed and a\ud distinction is made between economic/apolitical determinants and institutional/political\ud determinants. Categorising the literature in this way suggests the application of non-nested\ud tests in empirical work. The first step is to estimate the two models separately. All four test\ud statistics for non-nested hypotheses lead to the conclusion of double rejection. A\ud parsimonious comprehensive model, encompassing both economic and institutional variables,\ud is preferred as it passes all diagnostic tests and involves the acceptance conclusion from\ud pairwise non-nested tests