Chapter 11 - The Growth of the Public Sector in Austria: An Exploratory Analysis

Abstract

As in most other industrialized democratic countries, the growth of the public sector has become an important issue in the political debate of Austria in recent years. Both increasing awareness of the tax burden and the concern for the rapid growth of the public debt have led Austrian politicians and commentators to demand political actions to stabilize or reverse these developments. Although there is so far no consensus between the major political parties and interest groups on the appropriate size of the government sector and the desired division of labor between the private and the public sector, it is now generally agreed that a substantial tax reform, a decrease of the federal budget deficit, and to some extent, privatizations of publicly owned enterprises have a high priority on the politically desired agenda. To enact such far-reaching political and economic reforms, however, it seems necessary to get a more thorough picture of the development of the government sector in the past and its causes. Only when this has been accomplished can the normative issues of designing successful remedies for undesirable trends be tackled. This chapter presents an exploratory positive analysis of the growth of the Austrian government sector. It provides an overview of the development of the public sector in Austria from 1870 to the present emphasizing the expenditure side. It discusses some possible explanations suggested by theories of public finance and public choice, and presents reports of the first empirical tests of these suggested causes on Austrian data over the period 1955–1985. The chapter presents a stimulus for further research on Austrian government growth, especially empirical analyses using quantitative methods that so far are almost nonexisting.