Economic Development and the Growth of Public Expenditures in Scandinavia, 1875–1965
This paper examines the sources of the growth of the public sector in Norway, Sweden, and Denmark from 1875 to 1965. The analysis focuses on variations over time and across the three Scandinavian countries in the elasticity of public expenditures to growth in GNP, and in the patterns of relationship between the rate of growth of expenditures as a proportion of GNP and the rate of change in various socioeconomic, political and institutional indicators, using correlation and regression analysis of annual change-rate data. The results cast doubt on the applicability to the Scandinavian context of Herber's adaptation of Wagner's Law of the growth of the public sector in industrial society. The results also cast further doubt upon the applicability to public policy formation of the Bull–Galenson hypothesis concerning differences among the Scandinavian countries in the impact of the timing and rate of their industrialization on the radicalness of their labor movements. The variations of public policy over time and space might be better explained by anti-depression and war-time spending and by certain aspects of organizational ‘learning’, such as the tendency for policy-making behaviour to adjust only slowly to changing conditions and the post-Keynesian effort to fine-tune the economy.