Hostname: page-component-78c5997874-j824f Total loading time: 0 Render date: 2024-11-10T15:37:26.580Z Has data issue: false hasContentIssue false
  • English
  • Français

Why do small states have big governments?

Published online by Cambridge University Press:  04 February 2010

Karen L. Remmer
Karen L. Remmer*
Affiliation:
Department of Political Science, Duke University, Durham, NC, USA
*
* E-mail: remmer@duke.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

Building on the literature on public finance, this article explores the consequences of political scale for government spending. The central argument is that the tendency for small political units to have big governments is not merely the result of economies of scale in the provision of public goods, but a reflection of the greater pressures for public spending faced by politicians in smaller and more homogeneous political units. The importance of such political pressures relative to other influences on spending is assessed on the basis of subnational data by comparing the relationship between size and spending under democracy and dictatorship. To the extent that government expansion is driven by citizen demands, the impact of size on spending may be expected to be more pronounced under democratic than authoritarian governance. Results from a time-series cross-sectional analysis of growth in government spending are consistent with this expectation. Government growth is shaped not only by the population size of political units but also by the interaction between regime and size. Analysis of spending patterns under democratic rule further indicates that size is an important determinant of spending even after controlling for variations in citizen preferences, political institutions, electoral competitiveness, and economic performance. The results have important theoretical implications for the study of fiscal policy and democratic governance around the world because they suggest that political scale conditions the linkages between citizens and the state, creating widely varying incentives for government growth across differently sized political units.

Keywords

small statesgovernment sizepolitical scalegovernment spendingfiscal policy
Type
Research Article
Information
European Political Science Review , Volume 2 , Issue 1 , March 2010 , pp. 49 - 71
Copyright
Copyright © European Consortium for Political Research 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abizadeh, S. Gray, J. (1985), ‘Wagner’s law: a pooled time-series, cross-section comparison’, National Tax Journal 38(2): 209–216.CrossRefGoogle Scholar
Alesina, A., Baqir, R. Easterly, W. (1999), ‘Public goods and ethnic divisions’, Quarterly Journal of Economics 114(4): 1243–1284.CrossRefGoogle Scholar
Alesina, A. Wacziarg, R. (1998), ‘Openness, country size and government’, Journal of Public Economics 69(3): 305–321.CrossRefGoogle Scholar
Annett, A. (2002), ‘Politics, government size, and fiscal adjustment in industrial countries’, IMF Working Paper No. 162 (September). Washington, D.C.: International Monetary Fund.CrossRefGoogle Scholar
Bailey, M. Hickman, J. (2005), ‘District size matters: making elections safe’, Spectrum 78(1): 28–30.Google Scholar
Beck, N. (2001), ‘Time-series-cross-section data: what have we learned in the past few years?’, Annual Review of Political Science 4: 271–293.CrossRefGoogle Scholar
Beck, N. Katz, J.N. (1995), ‘What to do (and not to do) with time-series cross-section data’, American Political Science Review 89(3): 634–647.CrossRefGoogle Scholar
Bercoff, J., Nougués, J.P. (2005), ‘Las constituciones y el gasto público: el caso de las provincias argentinas’. Retrieved 2 May 2008 from www.aaep.org.ar/anales/works/works2005/bercoff_nougues.pdfGoogle Scholar
Bradbury, J.C. Crain, W.M. (2001), ‘Legislative organization and government spending: cross-country evidence’, Journal of Public Economics 82(3): 309–325.Google Scholar
Buchanan, J. Wagner, R. (1977), Democracy in Deficit: The Political Legacy of Lord Keynes, New York: Academic Press.Google Scholar
Calvo, E. Murillo, M.V. (2004), ‘Who delivers? Partisan clients in the Argentine electoral market’, American Journal of Political Science 48(4): 742–757.CrossRefGoogle Scholar
Cameron, D. (1978), ‘The expansion of the public economy: a comparative analysis’, American Political Science Review 72(4): 1234–1261.Google Scholar
Campbell, N.D., Finney, R.Z. Mitchell, D.T. (2001), ‘Hunting the whale: more evidence on state government Leviathans’, Southern Economic Journal 74(2): 566–580.CrossRefGoogle Scholar
Caplan, B. (2001), ‘Has Leviathan been bound? A theory of imperfectly constrained government with evidence from the states’, Southern Economic Journal 67(4): 825–847.Google Scholar
Comisión Económica para América Latina y el Caribe. Oficina de CEPAL en Buenos Aires (2003), ‘Estimación de las exportaciones según provincial de origen’. Retrieved 9 November 2007 from http://www.eclac.org/argentinaGoogle Scholar
Dahl, R.A. Tufte, E.R. (1973), Size and Democracy, Stanford, CA: Stanford University Press.Google Scholar
Ferris, J.S. West, E.G. (1996), ‘Testing theories of real government size: US experience, 1959–89’, Southern Economic Journal 62(3): 537–553.CrossRefGoogle Scholar
Fiorino, N. Ricciuti, R. (2007), ‘Legislature size and government spending in Italian regions: forecasting the effects of a reform’, Public Choice 131(1–2): 117–125.CrossRefGoogle Scholar
Garand, J. (1988), ‘Explaining government growth in the US states’, American Political Science Review 82(3): 837–849.Google Scholar
Garrett, G. (2001), ‘Globalization and government spending around the world’, Studies in Comparative International Development 35(4): 3–29.CrossRefGoogle Scholar
Gilligan, T.W. Matsusaka, J.G. (2001), ‘Fiscal polity, legislature size, and political parties: evidence from state and local governments in the first half of the 20th century’, National Tax Journal 54(1): 57–82.CrossRefGoogle Scholar
Goetz, C.J. (1977), ‘Illusion in state and local finance’, in T.E. Borcherding (ed.), Budgets and Bureaucrats: Sources of Government Growth, Durham: Duke University Press, pp. 176–187.Google Scholar
Gordin, J.P. (2007), ‘Patronage-preserving federalism? Legislative malapportionment and subnational fiscal policies in Argentina’. GIGA Working Papers No. 52. Hamburg: German Institute of Global and Area Studies. Retrieved 25 May 2008 from www.giga-hamburg.de/workingpapersGoogle Scholar
Guía Electoral: Información política y electoral de Argentina (2008). Retrieved 5 April 2008 from www.guiaelectoral.com.arGoogle Scholar
Hallerberg, M. Basinger, S. (1998), ‘Internationalization and changes in tax policy in OECD countries: the importance of veto players’, Comparative Political Studies 31(3): 321–352.CrossRefGoogle Scholar
Husted, T.A. Kenny, L.W. (1997), ‘The effect of the expansion of the voting franchise on the size of government’, Journal of Political Economy 105(1): 54–82.CrossRefGoogle Scholar
Iversen, T. Cusack, T.R. (2000), ‘The causes of welfare state expansion: deindustrialization or globalization?’, World Politics 52(3): 313–349.CrossRefGoogle Scholar
Katzenstein, P.J. (1985), Small States in World Markets: Industrial Policy in Europe, Ithaca: Cornell University Press.Google Scholar
Kaufman, R. Segura-Ubiergo, A. (2001), ‘Globalization, domestic politics and social spending in Latin America: a time-series cross-section analysis, 1973–97’, World Politics 53(4): 553–587.Google Scholar
Levitsky, S. (2003), Transforming Labor-Based Parties in Latin America: Argentine Peronism in Comparative Perspective, New York: Cambridge University Press.Google Scholar
Liberati, P. (2007), ‘Trade openness, capital openness and government size’, Journal of Public Policy 27(2): 215–247.Google Scholar
Marshall, M.G., Jaggers, K. (2006), ‘Polity IV Project: political regime characteristics and transitions 1800–2006’. Retrieved 8 January 2008 from www.cidcm.umd.edu/inscr/polityGoogle Scholar
McCormick, R.E. Tollison, R.D. (1981), Politicians, Legislation, and the Economy, The Hague: Martinus Nijhoff.Google Scholar
Meltzer, A.H. Richard, S.F. (1981), ‘A rational theory of the size of government’, Journal of Political Economy 89(5): 914–927.Google Scholar
Molana, H., Montagna, C. Violato, M. (2004), ‘On the causal relationship between trade-openness and government size: evidence from 23 OECD countries’. Research Paper Series 14. Nottingham: University of Nottingham.Google Scholar
Mueller, D.C. Murrell, P. (1986), ‘Interest groups and the size of government’, Public Choice 48(2): 125–145.CrossRefGoogle Scholar
Oates, W.E. (1985), ‘Searching for Leviathan: an empirical study’, American Economic Review 75(4): 748–757.Google Scholar
Olson, M. (1971), The Logic of Collective Action: Public Goods and the Theory of Groups, 2nd edn. Cambridge: Harvard University Press.Google Scholar
Persson, T. Tabellini, G. (1999), ‘The size and scope of government: comparative politics with rational politicians’, European Economic Review 43(4–6): 699–735.CrossRefGoogle Scholar
Petry, F., Imbeau, L., Crete, J. Clavet, M. (2000), ‘Explaining the evolution of government size in the Canadian provinces’, Public Finance Review 28(1): 26–47.CrossRefGoogle Scholar
Porto, A. (2004), Disparidades Regionales y Federalismo Fiscal, La Plata: Universidad Nacional de La Plata. Retrieved 1 April 2008 from www.depeco.econo.unlp.edu.ar/federalismo/pdfs/libro_federalismo.pdfGoogle Scholar
Przeworski, A. (1991), Democracy and the Market, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Quinn, D. (1997), ‘The correlates of change in international financial regulation’, American Political Science Review 91(3): 531–552.Google Scholar
Reynoso, D. (2004), ‘Las desventajas del “Doble Voto Simultáneo”. Argentina en perspectiva comparada’, Perfiles Latinoamericanos 24: 67–83. Retrieved 15 April 2008 from www.flacso.org.argGoogle Scholar
Rodden, J. (2003), ‘Reviving Leviathan: federalism and the growth of government’, International Organization 57(4): 695–729.Google Scholar
Rodrik, D. (1998), ‘Why do more open economies have bigger governments?’, Journal of Political Economy 106(5): 997–1032.CrossRefGoogle Scholar
Rogers, D.L. Rogers, J.H. (2000), ‘Political competition and state government size: do tighter elections produce looser budgets?’, Public Choice 105(1–2): 1–21.Google Scholar
Thornton, M. Ulrich, M. (1999), ‘Constituency size and government spending’, Public Finance Review 27(6): 588–598.CrossRefGoogle Scholar
Tow, A.. (2008), ‘Atlas Electoral de Andy Tow: Elecciones en Argentina desde 1983’. Retrieved 2 May 2008 from www.towsa.com/andy/Google Scholar
Tsebelis, G. (2002), Veto Players: How Political Institutions Work, Princeton: Princeton University Press.CrossRefGoogle Scholar
Universidad Nacional de La Plata (2003), Gastos y recursos provinciales: total y por provincias, La Plata: Departamento de Economía, Universidad Nacional de La Plata. Retrieved 20 March 2008 from www.depeco.econo.unlp.edu.ar/federalismo/pdfs/fuentes_info.pdfGoogle Scholar
Wagner, R. (1976), ‘Revenue structure, fiscal illusion, and budgetary choice’, Public Choice 25(1): 45–61.CrossRefGoogle Scholar
Weingast, B.R., Shepsle, K.A. Johnsen, C. (1981), ‘The political economy of benefits and costs: a neoclassical approach to distributive politics’, Journal of Political Economy 89(4): 642–664.CrossRefGoogle Scholar
Wibbels, E. (2006), ‘Dependency revisited: international markets, business cycles, and social spending in the developing world’, International Organization 60(2): 433–468.CrossRefGoogle Scholar
World Bank (2008), World Development Indicators, Washington, DC: World Bank.Google Scholar