On the Political Economy of Recent Public Sector Development

Abstract

This paper starts from a major contradiction in the literature on recent public sector development. On the one hand, globalization theory is read as implying major tendencies towards the retrenchment of the public sector and a ‘race to the bottom’ in social spending. On the other hand, comparative studies are largely unanimous in arguing that such tendencies have not occurred. To gain greater purchase on the realities of recent public sector trends, we disaggregate data for public expenditure change in 19 OECD countries over the period 1984 to 1997. We then develop a series of models of the factors determining expenditure trends over this period. The findings presented here provide no evidence that exposure to international trade leads governments to down-size their public sectors and suggest that the main influences on contemporary expenditure patterns have been unemployment, economic growth and catch-up from prior expenditure level.