ABSTRACTThis paper presents the results of tests of a number of models of public expenditure growth which have achieved wide currency. The main types of models examined are a permanent income model, electoral cycle models, and stabilization policy models. The models are tested with data from Britain and the United States of America and the results are compared with evidence from other countries. The paper concludes that government expenditure grows in proportion to national income because politicians find it convenient to plan that way; electoral-cyclical factors are relatively unimportant in determining public expenditure; there appears to be a limited role for public expenditure in economic stabilization policy; in a comparative context institutions of expenditure control are important in determining relative rates of growth of public sector consumption expenditure.
Optimal Economic Stabilization Policy under Uncertainty