In recent years there has been a revival of interest in the question of the impact of state expenditure, and of the behavior of the public sector in general, on the growth performance of advanced economies. Our aim is to elaborate a theoretical framework that will make possible the examination, both theoretical and empirical, of the effects of public spending on profits and on growth. The public sector is important in providing inputs to private production and to essential consumption, and this is an aspect of state activity that can best be studied within a theoretical model of production. We have therefore used a Sraffian input-output model to examine the implications for profits and for the real wage of the operation of certain tax-financed, non-market sectors. An interesting result is that, in a surplus-production model, deviations from market allocation may lead to greater efficiency, in the sense of more surplus and profits. The choice of techniques, the level and rate of profit are all affected by the non-market sectors and the direction of the effects depends on the technical characteristics of these sectors. This theoretical approach provides some insight into the effects that nationalization has had or may have in particular industries. Within the same framework, the effect of various types of transfers and subsidies are also being worked out (intermediate vs. wage goods, industries vs. individuals). Also, the role of the state in "unbalanced growth" (~ la Baumol) is examined, i.e., to what extent the provision of services with increasing relative costs by the state may hinder accumulation. A further step is made in moving from equilibrium or long-run growth analysis to the shortrun effects of state activity. Our aim here is to examine various types of state activity (state production of consumption and investment goods, subsidies, taxes, transfers, etc.) and to compare their effects on private profits. To this purpose, a Kaleckian model is devised and put to use. Finally, an attempt is made to consider changes in productivity within this approach. The short-run theory ties in with theories of crises and the role of the state vis-a-vis crises. A general framework is developed within which the contribution of contrasting theories is assessed. By comparing within the same formal framework the implications that different theories have as regards the effects of the state on accumulation, it will be possible to formulate a typology of state functions that could be empirically verifiable. It is then intended, on the basis of such theory, to examine different 0ECD countries at different times to assess what effect the "mixed economy" has had on accumulation, i.e., whe ther crowding-out or demand-boosting or productivity-augmenting or retarding effects have been dominant.